(Convenience translation of the independent auditor’s review report and condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ ve TİCARET A.Ş. AND ITS SUBSIDARIES JANUARY 1 – JUNE 30, 2019 CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS TOGETHER WITH INDEPENDENT AUDITOR’S REVIEW REPORT
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(Convenience translation of the independent auditor’s review report and condensed interim consolidated financial statements originally issued in Turkish)
ÇİMSA ÇİMENTO SANAYİ ve TİCARET A.Ş. AND ITS SUBSIDARIES
JANUARY 1 – JUNE 30, 2019 CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS TOGETHER WITH INDEPENDENT AUDITOR’S REVIEW REPORT
EP! Giley Bağ:rnsız Deretim ve SMMM AŞ Tel •9C 212 315 3000
Maslak Mah Eski Ouyükdere Cad Fax +90 212 230 82910r1.n Mas!ak ş Meirezı No 27 ey cot.iÇas 2-34 Daire 54-57-59 Ticaret Sicil Na 479920BuıI ngabe ter 34465 Sariyer Mersis Ne 0-4350-3032-6000017slanbul - Türkiye
(Convenience translation of a report and condensed consolidated fınancial statements originaliyissued in Turkish)
Report on Review of Interim Condensed Consolidated Financial Statements
To the Board of Directors of Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi
lntroduction
We have reviewed the accompanying interim condensed consolidated statement of flnancial positionof Çimsa Çimento Sanayi ve Ticaret A.Ş. (the Company) and its subsidiaries (the Group) as of June30, 2019 and the interim condensed consolidated statement of profit or Ioss and other comprehensiveincome, consolidated statement of changes in equity and the consolidated statement cash flows forthe six-month period then ended, and explanatory notes. Group management is responsible for thepreparation and presentation of these interim condensed consolidated financial statements inaccordance with Turkish Accounting Standard 34, Interim Financial Reporting (TAS 34). Ourresponsibility is to express a conclusion on these intehm condensed consolidated financial statementsbased on our review.
Scope of Review
We conducted our review in accordance with the Standard on Review Engagements (SRE) 2410“Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. Areview of interim financial information consists of making inquiries. pdmarily of persons responsible forfınancial and accounting matters, and applying analytical and other review procedures. A review ofinterim financial information is substantially Iess in scope than an audit conducted in accordance withIndependent Auditing Standards and the objective of which is to express an opinion on the fınancialstatements. Consequently, a review of the interim financial information does not provide assurancethat the audit flrm wiil be aware of alI significant matters that might be identifıed in an audit.Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our allention that causes us to believe that theaccompanying interim condensed consolidated fınancial statemenis am not prepared, in ali materialrespects, in accordance with TAS 34.
Güney - enetim ve Serbest Muhasebeci Mali Müşavirlik Anonim ŞirketiA m6 st ung Global Limited
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5 August 2019Istanbul, Türkiye
A murılber Sıra ol Ernsr 4 y0059 Global Lırriled
(Convenience translation of the independent auditor’s review report and interim consolidated financial
statements originally issued in Turkish)
ÇİMSA ÇİMENTO SANAYİ VE TİCARET ANONİM ŞİRKETİ AND ITS SUBSIDIARIES
TABLE OF CONTENTS
Page
Interim consolidated statement of financial position 1-2
Interim consolidated statement of profit or loss 3
Interim consolidated statement of other comprehensive income 4
Interim consolidated statement of changes in equity 5
Interım consolidated statement of cash flows 6
Notes to the interim consolidated financial statements 7-64
(Convenience translation of condensed interim consolidated financial statements originally issued in
Turkish)
ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019 (Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
The accompanying notes form an integral part of these condensed consolidated financial statements.
1
(Reviewed) (Audited)
Current Period Prior Period
30 June 31 December Note 2019 2018
ASSETS
Cash and cash equivalents 5 176.703.777 202.067.347
Trade receivables 6 492.809.028 435.316.646
Trade receivables from related parties 26 1.270.682 18.497
Trade receivables from third parties 491.538.346 435.298.149
Other receivables 2.986.650 1.593.821
Other receivables from related parties 26 228.723 248.597
Other receivables from third parties 8 2.757.927 1.345.224
Adjustments to share capital 17 41.741.516 41.741.516
Share premiums
1.099.415 1.099.415
Other comprehensive income/expense to be reclassified to profit or loss
(2.546.019) (24.584.144)
Foreign currency translation reserve
51.239.246 66.947.614
Cash flow hedge fund (57.581.013) (75.387.265)
Increase / (decrease) funds of available-for-sale financial assets
3.795.748 (16.144.493)
Other comprehensive income/expense not to be reclassified to profit
or loss
(7.332.883) (5.777.277)
Actuarial losses / gains on defined benefit plans (7.332.883) (5.777.277)
Restricted reserves 193.104.976 193.104.976
Retained earnings
985.356.923 830.431.391
Net profit for the year
23.201.464 154.925.532
Equity attributable to equity holders of the parent
1.369.709.834 1.326.025.851
Non-controlling interests
112.546.030 125.453.529
Total shareholders' equity
1.482.255.864 1.451.479.380
TOTAL LIABILITIES AND EQUITY
3.840.471.272 3.483.989.356
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
The accompanying notes form an integral part of these condensed consolidated financial statements.
Earnings per share from continuing operations 25 0,1718 0,8694 0,0371 0,5944
(Nominal amount of 1 Kr)
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
The accompanying notes form an integral part of these condensed consolidated financial statements.
Other comprehensive income/expense not to be reclassified to profit or loss
(1.595.494) (655.733) (2.967.344) (460.666) Actuarial gains/(losses) on defined benefit plans (1.994.367) (819.666) (3.709.180) (575.832)
Tax (income)/expense
398.873 163.933 741.836 115.166
OTHER COMPREHENSIVE INCOME (AFTER TAX) 21.128.863 (42.620.937) 25.848.398 (31.455.988)
TOTAL COMPREHENSIVE INCOME
30.776.484 79.745.766 23.941.882 56.246.290
Total comprehensive income attributable to
-Non-controlling interests
(12.907.499) 5.505.498 (6.636.097) 7.725.883
-Equity holders of the parent
43.683.983 74.240.268 30.577.979 48.520.407
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
The accompanying notes form an integral part of these condensed consolidated financial statements.
(*) The decision to distribute dividend of TRY 67.542.221from 2017 year profit was unanimously approved by the Ordinary General Assembly held on 27 March 2018 and the amount of TRY 38.935.065 payment
was completed on 29 March 2018 and the remaining amount was paid on 2 April 2018.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
The accompanying notes form an integral part of these condensed consolidated financial statements.
6
(Reviewed) (Reviewed)
Current Period Prior Period
1 January- 1 January-
Note 30 June
2019 30 June
2018
A. CASH FLOWS FROM OPERATING ACTIVITIES 37.924.089 10.115.864
Profit before taxation (5.770.807) 147.495.235
Adjustments to reconcile net profit/loss for the period 167.915.129 38.342.346
Adjustment related to depreciation and amortization expense 11 70.442.408 49.530.765
Adjustment related to tax expense/(income) 24 (15.418.428) 25.128.532
Adjustment related to gain on sale of fixed assets 22 (26.809.104) (10.129.862)
Adjustment related to undistributed retained profits of subsidiaries 3 (19.264.052) (19.964.228)
Adjustment related to allowance for doubtful receivable 6 937.387 196.347
Adjustment related to inventory impairment 9 299.333 (116.818)
Adjustment related to provisions for litigations 13 1.727.071 399.520
Adjustment related to minefield 13 25.806 647.718
Adjustment related to seniority provisions 15 7.648.238 4.589.472
Adjustment related to seniority incentives 15 530.070 198.498
Adjustment related unpaid vacation liability 15 1.810.464 1.197.334
Adjustment related to interest expense 21/23 108.114.534 62.386.606
Adjustment related to interest income 21/23 (5.423.085) (1.573.949)
Adjustment related to outstanding foreign currency translation differences 41.396.357 (71.591.439)
Adjustment related to fair value decrease/(increase) of derivative financial instruments 1.898.130 (2.556.150)
Changes in working capital (112.957.205) (154.622.715)
Short term trade receivables 6 (58.790.938) (43.658.325)
Inventories 9 (105.434.740) (70.310.591)
Other receivables/current assets/prepaid expenses (27.755.340) 1.198.121
Long-term trade receivables 6 - 1.586.011
Other long-term trade receivables/non-current/prepaid expenses (22.250.670) (1.565.668)
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 5 175.209.560 77.573.406
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
7
1. ORGANIZATION AND NATURE OF OPERATIONS
General
Çimsa Çimento Sanayi ve Ticaret A.Ş. (“Çimsa” or the “Company”) was founded with a declaration of the trade registry on 16 December 1972 which was announced at Turkish Trade Registry Gazette numbered 4729 and dated 21 December 1972. Operations of the Group consist of production and sales of cement, clinker and ready mix concrete. The ultimate shareholder of the Group is Hacı Ömer Sabancı Holding A.Ş. (“Sabancı Holding”).
The registered office address of the Group is Allianz Tower Küçükbakkalköy Mah. Kayışdağı Cad. No:1 Kat:23-24 34750 Ataşehir/İstanbul.
A certain amount of the shares of the Company is traded on Borsa İstanbul A.Ş. (BIST). In accordance with Article 82 of the BIST Basic Principles of Share Indexes, the shares of Çimsa are included in the BIST 100 index by the Directorate General of the Stock Exchange.
The upper limit of registered share capital of the Company is TRY 200.000.000 (31 December 2018- TRY 200.000.000)
As of 30 June 2019 and 31 December 2018, the information related to the Company’s subsidiaries and joint venture is as follows:
Sales of bulk and bagged cement to white cement market 100% 100%
Çimsa Mersin Serbest Bölge Şubesi (*) 12 Dec 2007 Mersin Export 100% 100%
Regent Place Limited (Regent) (*) 21 May 2008 British
Virgin Island Financial investment and holding company 100% 100%
OOO Çimsa Rus CTK (OOO Rusya) (*) 16 July 2008 Russia
White cement packaging, sales and marketing 100% 100%
Çimsa Adriatico Srl (*) 9 Feb 2010 Italy
Cement sales and marketing 70% 70%
Afyon Çimento Sanayi Türk Anonim Şirketi (*) 31 May 2012 Turkey
Cement production and sales 51% 51%
Çimsa Americas Cement Manufactıring and Sales Corporation (Cimsa Americas) (*) 7 July 2017 USA
Cement production and sales 100% 100%
(*) Full consolidation method has been applied.
The Company’s associate, Exsa Export Sanayi Mamülleri Satış ve Araştırma A.Ş. (“Exsa”) (effective ownership: 32,875%) is consolidated by the equity method.
For the purpose of presentation of the interim consolidated financial statements, Çimsa, its subsidiaries, its joint venture and its associate will be together referred as (“the Group”).
The interim consolidated financial statements were authorized for issue by the Board of Directors of Çimsa on 5 August 2019. The General Assembly and certain regulatory bodies have the power to amend the statutory financial statements after issuance.
The average number of Group’s employee for 2019 by categories is as follows: 652 blue collar (a union member) (2018:660), 500 white collar (not a union member) (2018:470) and 41 (2018:42) employees working for subsidiaries located abroad.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
8
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
2.1 Basis of presentation
Financial statements preparation principles
The accompanying interim consolidated financial statements have been prepared in accordance with the communiqué numbered II-14,1 “Communiqué on the Principles of Financial Reporting In Capital Markets” (“the Communiqué”) announced by the Capital Markets Board (“CMB”) (hereinafter will be referred to as “the CMB Reporting Standards”) on 13 June 2013 which is published on Official Gazette numbered 28676. In accordance with article 5th of the CMB Reporting Standards, companies should apply Turkish Accounting Standards / Turkish Financial Reporting Standards and interpretations regarding these standards as adopted by the Public Oversight Accounting and Auditing Standards Authority of Turkey (“POA”).
The functional and presentation currency of the Company is Turkish Liras (“TRY”).
Functional currency of Cement Sales North Gmbh, Çimsa Cementos Espana S.A.U., Regent Place Ltd. and Çimsa Adriatico SRL is Euro, the functional currency of Çimsarom Marketing Distribute Srl is New Romanian Lei (“Ron”), functional currency of OOO Çimsa – Rus Ctk is Ruble and functional currency of Cimsa Americas Cement Manufacturing and Sales Corporation is Dollar (“USD”). Based on TAS 21, for subsidiaries operating in countries without high inflation rates, the exchange rate used for translating the financial position items is the exchange rate at the balance sheet date; for income statement balances, the average exchange rate of the related period and the consolidated financial statements are presented in TRY. The resulting foreign currency gain/loss are recorded under the “Currency Translation Reserve” account in equity. The Company and the group companies established in Turkey maintain their books of account and prepare
their statutory financial statements (“Statutory Financial Statements”) in accordance with rules and principles
published by POA, the Turkish Commercial Code (“TCC”), tax legislation and the Uniform Chart of
Accounts issued by the Ministry of Finance. Subsidiaries that are registered in foreign countries maintain
their books of account and prepare their statutory statements in accordance with the prevailing accounting
principles in their registered countries. These consolidated financial statements have been prepared in
Turkish Lira under the historical cost convention except for available for sale financial assets, assets acquired
through business combination, derivative instruments and cash flow hedge reserve that are carried at fair
value. These consolidated financial statements are based on the statutory records with the required
adjustments and reclassifications reflected for the purpose of fair presentation in accordance with the Turkish
Financial Reporting Standards as adopted by POA. These adjustments and reclassifications mainly consist
of the effect of deferred tax calculation, provision for doubtful receivables, the accounting of expense
accruals, the effect of employee termination benefits and unused vacation pay liability calculated in
accordance with TAS 19 “Employee Benefits” (“TAS 19”), prorata depreciation of property and equipments
and intangible assets with useful life assessed by the management, capitalization of financing expenses made
in scope of TAS 23 “Borrowing Cost” (“TAS 23”) over construction in progress, the assessment of financial
assets and liabilities in accordance with IFRS 9 “Financial Instruments: Accounting and Measurement”
(“IFRS 9”), the accounting of IFRS 3 “Business Combinations” (“IFRS 3”) and the accounting of derivative
financial instruments and cash flow hedge reserves in accordance with IFRS 9.
2.2 Seasonality of the group’s operations
The operations of the Group increase in spring and summer season when the demand for the construction
increases and construction industry revives
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
9
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.3 Going concern
The Group prepared condensed interim consolidated financial statements in accordance with the going
concern assumption.
2.4 Offsetting
Financial assets and liabilities are offset and reported in the net amount when there is a legally enforceable right or when there is an intention to settle the assets and liabilities on a net basis or realize the assets and settle the liabilities simultaneously.
2.5 Comparative information and classification of prior period financial statements
Any change in accounting policies resulting from the first time adoption of a new standard is made either retrospectively or prospectively in accordance with the transition requirements. Changes without any transition requirement, material changes in accounting policies or material errors are corrected, retrospectively by restating the prior period consolidated financial statements. If changes in accounting estimates are related to only one period, they are recognised in the period when the changes are applied; if changes in estimates are related to future periods, they are recognised both in the period where the change is applied and in future periods prospectively.
2.6 Summary of significant accounting policies
Basis of consolidation
As at 30 June 2019, the consolidated financial statements include the financial statements of Çimsa and its
subsidiaries. Control is normally evidenced when the Company controls an investee if and only if the
company has all the following; a) power over the investee, b) exposure, or rights, to variable returns from its
involvement with the investee and, c) the ability to use its power over the investee to affect the amount of
company’s returns. The results of subsidiaries are included in the consolidated statements of profit or loss
from the effective date of acquisition.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies in line with those used by the Group. The consolidated financial statements are prepared using
common accounting policies for similar transactions and events and are prepared for the same accounting
system with the Company.
All intra-group transactions and balances including intra-group unrealized profits and losses are eliminated.
Minority interest in the net assets of consolidated subsidiaries is identified separately from the Group’s equity
therein. Minority interest consists of the amount of those interests at the date of the original acquisition and
the minority’s share of changes in equity since the date of the acquisition.
Losses within a subsidiary are attributed to minority interest even if that result is in deficit balance.
Transactions with minority shareholders are assumed to be occurred between main shareholders and so,
accounted under equity.
Share purchase/(sale) transactions with minority shareholders that does not result in loss of control in the
subsidiary are assumed to be occurred between the shareholders and are accounted under “differences arising
from the change in shareholding rate in subsidiaries” account.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
10
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.6 Summary of significant accounting policies (continued)
Basis of consolidation (continued)
Subsidiaries
Subsidiaries are consolidated from the date on which control is transferred to the Company until the date on
which the control is transferred out of the Company.
This control is normally evidenced when Çimsa owns, either directly or indirectly, more than 50% of the
voting rights of a group’s share capital and is able to govern the financial and operating policies of an
enterprise so as to benefit from its activities. Accordingly, the financial statements of Çimsa Cement,
Çimento and Çimsa Mersin are fully consolidated in accordance with IFRS 10 “Consolidated Financial
Statements”.
Non-controlling interests in the net assets of the consolidated subsidiaries are separately presented within the Group’s equity as non-controlling interests. Non-controlling interests are composed of the sum of those emerged at the initial business combination and non-controlling interests in the changes in equities occurred in the after-math of the business combination.
Associates
The associate of the Group, Exsa, is accounted by equity method, which is classified under the Group’s financial assets.
Investments accounted by equity method are presented in consolidated statement of financial position with additions or deductions of changes on share of the Group on net assets of the affiliate and with deduction of provisions for the decline in the value. The other comprehensive income statement presents shares of financial results of the Group’s affiliates. The changes of the amount, not reflected on income or loss of the affiliate, on the equity of the affiliate can requisite an adjustment on the net book value of the affiliate in proportion of the Group’s share. The share of the group from these changes is directly accounted under the Group’s equity.
Exsa’s financial statements are prepared for the same period and with respect to the same accounting policies.
The Group considers at each balance sheet date whether there is impairment on the investments accounted by equity method.
Cash and cash equivalents
For the purposes of the presentation of consolidated cash flow statement, cash and cash equivalents comprise cash on hand, cash in banks, checks readily convertible to known amounts of cash and short-term deposits with an original maturity of three months or less. Trade receivables
Trade receivables that are created by the way of providing goods or services directly to a debtor are measured
at amortized cost, using the effective interest rate method.
The provision for doubtful receivables is reflected in the records as an expense.If there is a concrete indication
that the outstanding receivables can not be collected, provision for doubtful receivables is set for the
company. The Company has preferred to apply “simplified approach” defined in IFRS 9 for the expected
credit losses. This method requires the recognition of expected life-time losses for all trade receivables.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
11
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.6 Summary of significant accounting policies (continued)
Basis of consolidation (continued)
Inventories
Inventories are valued at the lower of cost or net realizable value. Costs incurred in bringing each product to its present location and conditions are accounted for as follows:
Raw materials - purchase cost on a monthly average basis.
Finished goods and work-in-process - cost includes direct material and labor cost, the applicable allocation of fixed and variable overhead costs (considering normal operating capacity) on the basis of monthly average basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and estimated costs necessary to make the sale.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. The initial cost of property, plant and equipment comprises its purchase price and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenses for the repair of property, plant and equipment are normally charged against income. They are, however, capitalized in exceptional cases if they result in an enlargement or substantial improvement of the respective assets. Gains or losses on disposals of property, plant and equipment are determined by comparing proceeds with their carrying amounts and are included in the related income and expense accounts, as appropriate. Land is not subject to depreciation. Depreciation is calculated on all property, plant and equipment on a straight-line basis over the estimated useful life of the asset as below. The economic useful lives of property, plant and equipments are as follows:
Useful Lives
Land and land improvements 8–50 years
Buildings 4–50 years Machinery and equipment 2–50 years Furniture and fixtures 2–50 years
Motor vehicles 4–14 years
Leasehold improvements Lease period
Intangible assets
Intangible assets which mainly comprise of software and mining rights are measured at cost. Intangible assets
may be capitalized in case when they generate economic benefit and costs can ne measured accurately. Sub-
sequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amorti-
zation and accumulated impairment losses.
Where no internally-generated intangible asset can be recognized, development expenditure is charged to the
consolidated statement of profit or loss in the period in which it is incurred. The estimated useful lives of the
intangible assets are determined as either a specific time or perpetual. Amortization is calculated using the
straight-line method over the estimated useful life. The estimated useful life and amortization method are
reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted
for on a prospective basis.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
12
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.6 Summary of significant accounting policies (continued)
Basis of consolidation (continued)
The amortization expenses of the intangible assets with certain estimated useful lives are reflected into the
consolidated statement of profit or loss in accordance with the function of the intangible asset.
Intangible assets which mainly comprise of software and mining rights are capitalized at cost. Except for mining
rights, intangible assets are amortized with respect to straight-line method over the estimated useful life (5
years) of the related intangible asset.
Mining rights are amortized based on the ratio of depletion of mining reserves to total reserves. The remaining
amortization period depends on the depletion rate of the reserves.
The Group does not have any intangible assets with indefinite useful life.
The carrying values of intangible assets are reviewed for impairment when there is any event or changes in
circumstances indicate that the carrying value may not be recoverable.
Derecognition of tangible and intangible assets
Tangible and intangible assets are derecognised on disposal, or when no future economic benefits are
expected from use or disposal.
Gains or losses arising from derecognition of tangible and intangible assets, measured as the differences
between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when
the asset is derecognised.
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss in the consolidated statement of profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Cırgalan ready-mix concrete facility is purchased with the amount of TRY 4.640.259, the valuation of
goodwill amounting to TRY 3.705.259 after emerging held for property has been accounted in the Group's
consolidated balance sheet. According to IFRS 3 Business Combinations Standard, the Group have accounted
the provisional value due to the determination of the completion of the initial recognition process according
to the combinations. In subsequent periods of the initial recognition, an impairment test will be performed
for the cash-generating units for the respective groups.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
13
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.6 Summary of significant accounting policies (continued)
Impairment on non-financial assets
At each balance sheet date, the Group assesses whether there is any indication that book value of tangible
and intangible assets, calculated by acquisition cost less accumulative amortization, is impaired. When an
indication of impairment exists, the Group estimates the recoverable amount of such assets. When individual
recoverable value of assets cannot be measured, recoverable value of cash generating unit of that asset is
measured.
Recoverable amount is the higher of value in use or fair value less costs to sell. Value in use is the present
value of the future cash flows expected to be derived from an asset or cash-generating unit by using discount
rates before taxes that reflects risks related with that asset. The main estimates that are used during these
analyses comprise expected inflation rates, expected increase in sales and cost of sales, expected changes in
export-domestic market composition and expected growth rate of the country
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment
loss is recognized immediately in the consolidated statement of profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had no impairment loss been recognized
for the asset (cash-generating unit) in previous years. Impairment loss on goodwill cannot be reversed in the
consolidated statement of profit or loss in future periods.
Business combinations
The acquisition of subsidiaries and businesses are accounted for using the acquisition method. The
consideration transferred in a business combination is measured at fair value, which is calculated as the sum
of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to
the former owners of the acquire and the equity interests issued by the Group in exchange for control of the
acquire. Acquisition-related costs are generally recognized in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair
value at the acquisition date, except that:
• Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognized and measured in accordance with TAS 12 Income Taxes and TAS 19 Employee Benefits respectively;
• Liabilities or equity instruments related to share-based payment arrangements of the acquire or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquire are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and
• Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
14
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.6 Summary of significant accounting policies (continued)
Business combinations (continued)
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-
controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the
acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the
liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets
acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-
controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree
(if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share
of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-
controlling interests' proportionate share of the recognized amounts of the acquiree's identifiable net assets.
The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-
controlling inter-ests are measured at fair value or, when applicable, on the basis specified in another IFRS.
When the consideration transferred by the Group in a business combination includes assets or liabilities
resulting from a contingent consideration arrangement, the contingent consideration is measured at its
acquisition-date fair value and cluded as part of the consideration transferred in a business combination.
Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are
adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments
are adjustments that arise from additional information obtained during the ‘measurement period’ (which
cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition
date.
The subsequent accounting for changes in the fair value of the contingent consideration that is not considered
measurement period correction depends on the classification type of the contingent consideration. The
contingent consideration, which is classified as equity may not be remeasured and related subsequent
payment is accounted for under equity. If the contingent consideration that is classified as an asset or liability
is in the nature of a financial instrument, and conforms to IFRS 9 Financial Instruments: Accounting and
Measurement standard, such contingent consideration is measured at its fair value and gain or loss arising
from the change is recognized as profit or loss. Those that do not conform to IFRS 9 standard are accounted
for according to TAS 37 Provisions or other appropriate IFRS standards.
When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree
is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the
resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree
prior to the acquisition date that have previously been recognised in other comprehensive income are
reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which
the combination occurs, the Group reports provisional amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional
assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that
existed at the acquisition date that, if known, would have affected the amounts recognised at that date.
Business combinations that took place prior to 1 January 2010 were accounted for in accordance with the
previous version of IFRS 3.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
15
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.6 Summary of significant accounting policies (continued)
Foreign currency transactions
The Company and its subsidiaries translate the transactions in foreign currencies during the period at the ex-
change rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies have been translated at the exchange rates prevailing at period-end and exchange gains or losses
arising on the settlement and translation of foreign currency items have been included in the consolidated
statement of profit or loss. Non-monetary items carried at cost that are denominated in foreign currencies are
translated at the rates on the initial transaction date. Non-monetary items carried at fair value that are
denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was
determined.
Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in
equity. On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect
of that operation attributable to the owners of the Group is reclassified to profit or loss.
Foreign currency translation rates used as of respective period-ends are as follows:
Date 30 June 2019 31 December 2018
USA Dollar (“USD”)/TRY 5,7551 5,2609
Euro (“EUR”)/TRY 6,5507 6,0280
Ruble (“RUB”)/TRY 0,0908 0,0753
Ron (“RON”)/TRY 1,3760 1,2866
Sterlin (“GBP”)/TRY 7,2855 6,6528
Foreign currency translation rates used as of respective period-ends are as follows:
Date 2019 2018
USD/TRY 5,6163 4,5607
EUR/TRY 6,3420 5,3092
RUB/TRY 0,0856 0,0723
RON/TRY 1,3300 1,1329
GBP/TRY 7,1980 5.9810
Borrowing costs
The borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part
of the cost of the respective assets. All other borrowing costs are expensed in the period in which they occur.
Borrowing costs include interests and other costs related to the borrowing activity.
General borrowings of the Group are capitalized to the applicable qualifying assets based on a capitalization
rate. The capitaliz ation rate is the weighted average of the borrowing costs applicable to the borrowings of
the entity that are outstanding during the period, other than borrowings made specifically for the purpose of
obtaining a qualifying asset. Investment income earned on the temporary investment of specific borrowings
pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for
capitalization. Other all borrowing costs are booked in the consolidated statement of profit or loss, when
incurred.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
16
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.6 Summary of significant accounting policies (continued)
Provisions, contingent assets and liabilities
Provisions are recognized when the Group has a present obligation as a result of a past event, and it is
probable that the Group will be required to settle that obligation, and a reliable estimate can be made of the
amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation.
Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Income tax
Tax expense/(income) is the aggregate amount included in the determination of net profit or loss for the period in respect of current and deferred tax.
Tax expense/(income) is the aggregate amount included in the determination of net profit or loss for the period in respect of current and deferred tax. Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and unused tax losses can be utilized. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred tax can be directly related to equity accounts if it’s related to the transactions in connection with the share capital in the same or different period. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Provisions for employee benefits / retirement pay provision
a. Defined benefit plan
In accordance with existing social legislation in Turkey, the Group is required to make lump-sum termination
indemnities to each employee who has completed over one year of service with the Group and whose
employment is terminated due to retirement or for reasons other than resignation or misconduct.
As indicated in Note 16 in detail, in the accompanying financial statements, the Group has reflected a liability using the “Projected Unit Credit Method” based on the actuarial valuation performed by independent actuaries. The employee termination benefits are discounted to the present value of the estimated future cash outflows using the interest rate estimate of qualified actuaries.
Under Turkish law and union agreements, lump sum payments are made to employees retiring or involuntarily leaving the Group. Such payments are considered as being part of defined retirement benefit plan as per TAS 19.
The retirement benefit obligation recognized in the consolidated statement of financial position represents the present value of the defined benefit obligation. All actuarial gains and losses are recognized in equity.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
17
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.6 Summary of significant accounting policies (continued)
b. Defined contribution plans
The Group pays contributions to the Social Security Institution of Turkey on a mandatory basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due.
c. Seniority provision
The Group has a liability to pay seniority incentive premium to the blue collar workers for five years period in accordance with the collective labor agreement. The Group discounts each first future payment and records the amounts to its consolidated statement of profit or loss.
d. Vacation rights
Liabilities arising from unused vacation rights are accrued in the periods when they are deserved.
Leasings
Leasing acitivites - as lessee
Financial leasing
Financial leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against the consolidated statement of profit or loss. Capitalized leased assets are depreciated over the estimated useful life of the asset.
Operating lease
Leases of assets under which substantially all the risks and rewards of ownership are effectively retained by
the lessor, are classified as operating leases. Lease payments under an operating lease are recognized as an
expense on a straight-line basis over the lease term.
Related parties
A party is related to the Company if:
(a) Directly, or indirectly through one or more intermediaries, the party: (i) controls, is controlled by, or is under common control with, the entity (this includes parents,
subsidiaries and fellow subsidiaries); (ii) has an interest in the entity that gives it significant influence over the entity; or (iii) has joint control over the entity;
(b) the party is an associate of the entity; (c) the party is a joint venture in which the entity is a venturer; (d) the party is a member of the key management personnel of the entity or its parent; (e) the party is a close member of the family of any individual referred to in (a) or (d); (f) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which
significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or
(g) the party is a post-employment benefit plan for the benefit of employees of the entity, or of any entity that is a related party of the entity.
A related party transaction is a transfer of resources, services, or obligations between related parties, regardless of whether a price is charged.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
18
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.6 Summary of significant accounting policies (continued)
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates, and other similar allowances.
Sale of goods
Group recognises revenue based on the following five principles in accordance with the IFRS 15 - “Revenue
from Contracts with Customers” standard effective from 1 January 2018:
• Identification of customer contracts
• Identification of performance obligations
• Determination of the transaction price in the contracts
• Allocation of transaction price to the performance obligations
• Recognition of revenue when the performance obligations are satisfied
According to this model, the goods or services undertaken in each contract made primarily with the customers
are evaluated and each commitment given to transfer the goods or services is determined as a separate act of
obligation. Afterwards, it is determined that the fulfillment obligations will be fulfilled in time or in a certain
way. Whether the control of a good or service is over time and the community fulfills its performance
obligations in relation to the sale in time, the community measures the progress of the revenue and accounts
in their consolidated financial statements.
• It is probable that the economic benefits associated with the transaction will flow to the entity, and
• The costs incurred or to be incurred in respect of the transaction can be measured reliably.
Interest
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.
Dividends
Dividend income from investments is recognized when the shareholder's right to receive payment has been estab-lished (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably).
Earnings per share
Basic earnings per share in the consolidated statement of profit or loss are calculated by dividing the net profit for the period by the weighted average number of ordinary shares outstanding during the period.
In Turkey, companies can increase their share capital by making distribution of free shares to existing shareholders from various internal resources. For the purpose of the earnings per share calculation such share issues are regarded as issued stock. Accordingly, the weighted average number of shares used in earnings per share calculation is derived by giving retroactive effect to the issue of such shares.
Events subsequent to the balance sheet date
Subsequent events occurring after the balance sheet date and which may affect the Group's position at the balance sheet date are reflected in the consolidated financial statements. The issues that occur after the balance sheet date are disclosed in the notes according to their importance.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
19
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.6 Summary of significant accounting policies (continued) Trade and settlement date accounting
All financial asset purchases and sales are recognized at the transaction date, in other words, on the date when the Group commits to purchase or sell. Ordinary purchases and sales are purchases and sales where the delivery period of the asset is generally determined in accordance with legislation or regulations in the markets.
Financial instruments
A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.
A financial asset is any asset that is:
• cash, • a contractual right to receive cash or another financial asset from another enterprise, • a contractual right to exchange financial instruments from another enterprise under conditions that are
potentially favorable, or, • an equity instrument of another enterprise
A financial liability that is a contractual obligation:
• To deliver cash or another financial asset to another enterprise, or • To exchange financial instruments with another enterprise under conditions that are potentially
unfavorable.
When a financial asset or financial liability is recognized initially, it is measured at its cost, which is the fair value of the consideration given (in the case of an asset) or received (in case of a liability) for it. Transaction costs are included (deducted for financial liabilities) in the initial measurement of all financial assets and liabilities.
The fair value is the amount for which a financial instrument could be exchanged in a current transaction between ceiling parties, other than in a faced sale or liquidation, and this best evidenced by a quoted market price, if one exist.
Fair value of financial instruments
The methods and assumptions in fair value estimation of the financial instruments of the Group are explained in Note 28.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment.
Trade receivables included in the category of loans and receivables are recorded in the accounts with their invoiced amounts and are carried at net values discounted by the effective interest rate method in the following periods and if there is provision for doubtful receivables, it should be deducted.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
20
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.6 Summary of significant accounting policies (continued)
Available for sale financial assets
All available for sale financial assets are initially recognized at cost, being the fair value of the consideration given and including acquisition charges associated with the financial asset.
After initial recognition, available for sale financial assets are measured at fair value. Gains or losses on available for sale investments are recognized as a separate component of equity, “Available for sales financial assets revaluation fund”, until the financial asset is sold, collected or otherwise disposed, or until the financial asset is determined to be impaired, at which time the cumulative gain or loss previously disclosed in equity is associated to income and expense accounts.
For financial assets that are actively traded on a quated market, fair value is determined based on the quoted market bid prices at closing on the balance sheet date. When there is no quoted market price for the equity instruments, such financial assets are stated at their costs less impairment provision if any.
Impairment on financial assets
Except for the financial assets whose fair value differences are accounted under profit and loss statement, financial assets or financial asset groups are assessed at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired.
A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that had occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset or the group of finan-cial assets that can be reliably estimated.
As there is no applicable valuation method for valuation of financial investments that are not traded in the stock exchange, the related financial investments are valued with their historical costs. Loans and receivables are held to provide contractual cash flows and lead to cash flows of principal and interest. The Company analyzed the contractual cash flow characteristics of these financial instruments and decided that they should be shown at their amortized cost in accordance with IFRS 9. Therefore, there is no classification of these financial instruments.
In case trade receivables cannot be collected, the related amount is written off from allowance account. The change in allowance account is accounted in the consolidated statement of profit or loss. The allowance for doubtful receivables is established through a provision charged to expenses. Provision is provided when there is objective evidence that the Group will not be able to collect the debts. The Company uses the simplified approach in IFRS 9 to calculate the expected credit losses of these financial assets. This method requires the recognition of lifetime expected credit losses for all trade receivables.
When the fair value of an available-for-sale financial asset that carried at its fair value is below its cost value
of the financial asset due to the fluctuations in the market, the Group assesses the impairment by considering
if the fair value decline is material, permanent and not recoverable in the long-term. In accordance with the
Group’s accounting estimations and policies, in order to assess the fair value decline in the available-for-sale
financial asset to be permanent and not recoverable in the long-term, at least one year should pass from the
date that the fair value is below its cost of the financial asset. In case there is any impairment, such impairment
is transferred from equity to the consolidated statement of profit or loss.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
21
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.6 Summary of significant accounting policies (continued)
Financial liabilities
Financial liabilities are recognized initially at fair value and at directly attributable transaction costs and after
initial recognition; financial liabilities are subsequently measured at amortized cost by using the effective
interest rate method.
Effective interest rate method is the amortized cost method and allocation of the related interest expenses to
the related periods. Effective interest rate is the rate reducing the future expected cash payments to present
value of the financial liability within an expected life of the asset or in a shorter period.
Bank borrowings
All borrowings are initially recognized at cost, being the fair value of the consideration received net of issue
costs associated with the borrowing.
After initial recognition, borrowings are subsequently measured at amortized cost using the effective interest
rate method. Amortized cost is calculated by taking into account any issue costs, and any discount or
premium on settlement.
Gains and losses are recognized in the consolidated statement of profit or loss when the liabilities are
derecognized, as well as through the amortization process.
Trade payables
Trade and other payables are carried at amortized cost which is the fair value of the consideration to be paid
in the future for goods and services received, whether or not billed to the Group.
Derivative financial instruments and hedge accounting
The operations of the Group expose the entity to financial risks mainly due to the change in foreign currency
exhange rates and interest rates. The Group mainly utilizes derivative instruments mainly foreign currency
forward contracts to hedge its foreign currency risk associated with certain binding commitments and
forecasted future transactions. The Group does not use derivative financial instruments for speculative
purposes. Derivative financial instruments are initially recognised at fair value on the date on which a
derivative contract is entered into and are subsequently remeasured at fair value.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is directly recognized in equity. The gain or loss relating to the ineffective portion is recognized immediately in the consolidated statement of profit or loss. The Group’s policy to hedge foreign currency risk associated with a binding commitment classifies the related risk as cash flow hedge. When the hedge transaction does not result in the recognition of an asset or a liability, the amounts in equity are recognized in the consolidated statement of profit or loss when the hedged item affects the statement of profit or loss. The changes in the fair value of derivatives that do not qualify as cash flow hedge are recognized in the statement of profit or loss.
Hedge accounting is discontinued when the hedging instrument expires or is sold, or when it no longer qualifies for hedge accounting. The cumulative gain or loss related with hedge instrument accounted under equity as of such date is continued to be recognized under equity until the expected realization date of the transaction.
When the hedge transaction is no longer expected to occur, the net accumulated gain or loss in equity is recognized in profit or loss of the period.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
22
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.6 Summary of significant accounting policies (continued)
Changes in the fair value of derivative financial instruments that are designated and effective as hedges of
future cash flows are accounted directly in equity as "Hedges funds". Furthermore, the Group is protected
from foreign net investment risk arising from changes in foreign currency financial liabilities and foreign
exchange rates. The effective portion of changes in the foreign exchange rates of the foreign currency
financial liabilities is accounted under equity as "Hedge funds".
Recognition and derecognition of financial instruments
The Group recognizes a financial asset or financial liability in its consolidated statement of financial position when it becomes a party to the contractual provisions of the instrument. The Group derecognizes a financial asset or a portion of financial asset when and only when it loses control of the contractual rights that comprise the financial asset or a portion of financial asset and when risk and benefit related to property. The Group derecognizes a financial liability when a liability is extinguished that is when the obligation specified in the contract is discharged, cancelled and expired.
Research expenses and development costs
When research expenses realized, they are recorded as an expense. Project costs which is related to research of the product or desing of the product are considered as an intangible asset if the the project succesfully applied from commercial and technological aspects. Other development expenses are recorded as an expense when realized. Development costs recorded in the prior period can not be capitalized in the following period.
2.7 Comparative information
The financial statements of the Group have been prepared comparatively with the previous period in order to enable information about financial position and performance trends. If the presentation or classification of the financial statements is changed, in order to be comparative, financial statements of the previous periods are also reclassified and significant changes are disclosed. In the statement of financial position for the year ended 31 December 2018, the Group has reclassified the old land held for sale amounting to TRY 230.303 which is accounted under property, plant and equipment to non-current assets classified as held for sale. In the statement of financial position for the year ended 31 December 2018, the Group has reclassified its credit card receivables amounting to TRY 15.359.786 in cash and cash equivalents to trade receivables.
2.8 The new standards, amendments and interpretations
The accounting policies adopted in preparation of the interim consolidated financial statements as at June 30,
2019 are consistent with those of the previous financial year, except for the adoption of new and amended
TFRS and TFRIC interpretations effective as of January 1, 2019. The effects of these standards and
interpretations on the Group’s financial position and performance have been disclosed in the related
paragraphs.
i) The new standards, amendments and interpretations which are effective as at 1 January 2019
TFRS 16 Leases
In April 2018, POA has published a new standard, TFRS 16 'Leases'. The new standard brings most leases
on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance
leases. Lessor accounting however remains largely unchanged and the distinction between operating and
finance leases is retained. TFRS 16 supersedes TAS 17 'Leases' and related interpretations and is effective
for periods beginning on or after January 1, 2019, with earlier adoption permitted.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
23
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
2.8 The new standards, amendments and interpretations (continued)
Lessees have recognition exemptions to applying this standard in case of short-term leases (i.e., leases with
a lease term of 12 months or less) and leases of ’low-value’ assets (e.g., personal computers, office
equipment, etc.). At the commencement date of a lease, a lessee measures the lease liability at the present
value of the lease payments that are not paid at that date (i.e., the lease liability), at the same date recognises
an asset representing the right to use the underlying asset (i.e., the right-of-use asset) and depreciates it during
the lease term. The lease payments shall be discounted using the interest rate implicit in the lease, if that rate
can be readily determined. If that rate cannot be readily determined, the lessee shall use the lessee’s
incremental borrowing rate. Lessees are required to recognise the interest expense on the lease liability and
the depreciation expense on the right-of-use asset separately.
Lessees are required to remeasure the lease liability upon the occurrence of certain events (e.g. a change in
the lease term, a change in future lease payments resulting from a change in an index or rate used to determine
those payments). Under these circumstances, the lessee recognises the amount of the remeasurement of the
lease liability as an adjustment to the right-of-use asset.
Transition to TFRS 16:
The Group applied TFRS 16 “Leases” as of 1 January 2019, which replaces TAS 17 ”Leases“. The Group
has not restated comparable amounts for the previous year using the simplified transition application. With
this method, all right of use assets are measured at the amount of the lease payables during the transition to
application (adjusted for prepaid or accrued rental costs).
During the initial application, the Group recognized a lease obligation for leases previously classified as
operational leases in accordance with TAS 17. These liabilities are measured at the present value of the
remaining lease payments discounted using the alternative borrowing interest rates as of 1 January 2019. As
of 1 January 2019, the weighted average borrowing rate used by the Group is 5% (Euro).
The right to use and liability of the leases previously classified as finance leases is measured from the carrying
value of the assets before the transition.
1 January 2019
Operational lease commitments
- Short-term leases -
- Low value leases -
- Contracts evaluated under TFRS 16 109.534.199
Total lease obligation 109.534.199
Discounted lease obligation with alternative borrowing rate (TRY Equivalent) 52.802.238
- Short term lease obligation 3.842.444
- Long term lease obligation 48.959.794
The details of the righf of use asset on the basis of asset are as follows:
The Right of Use Assets 1 January 2019 Depreciation Expense 30 June 2019
Properties 43.160.749 2.925.804 40.234.945
Vehicles 7.008.935 2.860.562 4.148.373
Others 2.986.898 247.701 2.739.197
53.156.582 6.034.067 47.122.515
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
24
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
i) The new standards, amendments and interpretations which are effective as at 1 January 2019
(continued)
Transition to TFRS 16 (continued)
The following are the new accounting policies of the Group on the application of TFRS 16:
The Group as a leasee
The Group evaluate a contract whether the contract is a lease or whether it is a lease. In the case that the
contract assigns the right to control the use of the identified asset for a period of time for a certain amount of
time, this contract is a lease or includes a lease. The Group considers the following conditions when assessing
whether a contract transfers the right to control the use of a defined asset for a specified period:
a) The contract contains the defined asset; an asset is generally defined by specifying it explicitly or
implicitly in the contract.
b) A functional part of the entity is physically separate or represents almost all of the entity's capacity.
An asset is not identified if the supplier has a principal right to replace the asset and provides
economic benefit therefrom.
c) Having the right to obtain almost all of the economic benefits to be obtained from the use of the
defined asset
d) Have the right to manage the use of the identified asset. The Group considers that the asset has the
right to use if the decisions about how and for what purpose the asset is used are determined in
advance. The Group has the right to manage the use of the asset when:
i. The Group has the right to operate the asset during its useful life (or to direct others to operate
the asset in its designated manner) and the supplier does not have the right to change these
operating instructions or
ii. The Group has designed the asset (or certain characteristics of the asset) in advance to
determine how and for what purpose the asset will be used during its useful life.
The Group recognizes a right of use and a lease obligation on the financial statements at the date of the lease.
The right to use assets
The right of use assets is initially accounted for at cost and includes:
a) Initial measurement of lease obligation
b) includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments
made at or before the commencement date less any lease incentives received.
c) all initial direct costs incurred by the group and
When applying the group cost method, the right of use asset;
a) measured at cost, less any accumulated depreciation and impairment losses, and
b) adjusted for any remeasurement of lease liabilities.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
25
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
i) The new standards, amendments and interpretations which are effective as at 1 January 2019
(continued)
Transition to TFRS 16 (continued)
The Group applies the depreciation provisions of TAS 16 Property, Plant and Equipment when depreciating
the right of use assets. If the supplier transfers ownership of the underlying asset to the Group at the end of
the lease term, or if the cost of use rights shows that the Group will use a purchase option, the Group
depreciates the right of use asset from the effective date of the lease to the end of the useful life. In other
cases, the Group depreciates the right of use on the basis of the shorter of the useful life or the lease term,
starting from the effective date of the lease.
The Group applies TAS 36 Impairment of Assets to determine whether an asset is impaired and to recognize
any impairment loss.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value
of lease payments to be made over the lease term. Lease payments are discounted using the imputed interest
rate on the lease, if the rate can be easily determined. If this rate cannot be determined easily, the Company
uses the Group's alternative borrowing interest rate.
Lease payments included in the measurement of the lease labilities will be made for the right of use of the
underlying asset during the lease and the following unpaid payments on the date that the lease actually
commences:
a) the lease payments include fixed payments (including in-substance fixed payments) less any lease
incentives receivable
b) variable lease payments that depend on an index or a rate, and amounts expected to be paid under
residual value guarantees
c) the lease payments also include the exercise price of a purchase option reasonably certain to be
exercised by the Group and
d) payments of penalties for terminating a lease, if the lease term reflects the Group exercising the
option to terminate.
After the effective date of the lease, the Group measures the lease liabilities as follows:
a) Increases the book value to reflect the interest in the lease liabilities,
b) Decreases book value to reflect rental payments made and
c) Measures the book value to reflect reassessments and restructurings, or to reflect revised essence of
fixed lease payments.
The interest on the lease obligation for each period in the lease term is the amount found by applying a fixed
periodic interest rate to the remaining balance of the lease liabilitites. The periodic interest rate, if easily
determined, is the implicit interest rate on the lease. If this rate cannot be determined easily, the Group uses
the Group's alternative borrowing interest rate. After the effective date of the lease, the Group re-measures
the lease liabilities to reflect changes in lease payments. The Company reflects the remeasurement amount
of the lease liabilities to the financial statements as an adjustment to the right of use.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
26
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
i) The new standards, amendments and interpretations which are effective as at 1 January 2019
(continued)
Transition to TFRS 16 (continued)
The Group re-measures its lease liabilities by reducing the revised lease payments at a revised discount rate
if either of the following conditions occurs:
a) Having a change in leasing time. The Group determines the revised lease payments based on the
revised lease term.
b) Changes in the assessment of the option to purchase the underlying asset. The Company determines
revised lease payments to reflect the change in the amounts payable under the purchase option.
The Group calculates the revised discount rate for the remainder of the lease term if the implicit interest rate in the lease can be easily determined; if it is not easily determined, the Group determines the alternative borrowing interest rate at the date of the revaluation. The Group re-measures its rent obligation by reducing the revised lease payments if either of the following conditions occurs:
a) A change in the amounts expected to be paid under a residual value commitment. The Group determines the revised lease payments to reflect the change in the amounts expected to be paid under the residual value commitment.
b) A change in these payments as a result of an index or rate change used to determine future lease payments. The Group remeasures the lease obligation to reflect these revised lease payments only when there is a change in cash flows.
The Group determines the revised lease payments regarding the remaining lease term based on the revised contractual payments. In this case, the Group uses an unaltered discount rate. The Group recognizes the restructuring of the lease as a separate lease if both of the following conditions are met:
a) Restructuring will extend the scope of the lease by adding the right to use one or more underlying assets and
b) The increase in the lease value is equal to the price of the increase in coverage alone and the appropriate adjustments to the price alone to reflect the terms of the contract.
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term. The Group- as a leaser All of the Group's lessor leases are operational leases. In operational leases, leased assets are classified in the consolidated balance sheet under investment property, tangible fixed assets or other current assets and the rent income obtained is reflected to the consolidated income statement in equal amounts during the leasing period. Lease income is recognized on a straight-line basis over the period of the lease.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
27
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
i) The new standards, amendments and interpretations which are effective as at 1 January 2019
(continued)
Transition to TFRS 16 (continued) For a contract that includes one or more additional leasing components with a leasing component, the Group distributes the price in the contract, applying TFRS 15, has Revenue from contracts with customers”. Amendments to TAS 28 “Investments in Associates and Joint Ventures” (Amendments) In December 2017, POA issued amendments to TAS 28 Investments in Associates and Joint Ventures. The amendments clarify that a company applies TFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture. TFRS 9 Financial Instruments excludes interests in associates and joint ventures accounted for in accordance with TAS 28 Investments in Associates and Joint Ventures. In this amendment, POA clarified that the exclusion in TFRS 9 applies only to interests a company accounts for using the equity method. A company applies TFRS 9 to other interests in associates and joint ventures, including long-term interests to which the equity method is not applied and that, in substance, form part of the net investment in those associates and joint ventures. These amendments are applied for annual periods beginning on or after 1 January 2019. The amendments did not have a significant impact on the financial position or performance of the Group. TFRIC 23 Uncertainty over Income Tax Treatments The interpretation clarifies how to apply the recognition and measurement requirements in “TAS 12 Income Taxes” when there is uncertainty over income tax treatments. When there is uncertainty over income tax treatments, the interpretation addresses: (a) whether an entity considers uncertain tax treatments separately; (b) the assumptions an entity makes about the examination of tax treatments by taxation authorities; (c) how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and (d) how an entity considers changes in facts and circumstances. The interpretation is effective for annual reporting periods beginning on or after 1 January 2019. The interpretation did not have a significant impact on the financial position or performance of the Group.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
28
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued) Annual Improvements – 2015–2017 Cycle In January 2019, POA issued Annual Improvements to TFRS Standards 2015–2017 Cycle, amending the following standards:
- TFRS 3 Business Combinations and TFRS 11 Joint Arrangements — The amendments to TFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to TFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.
- TAS 12 Income Taxes — The amendments clarify that all income tax consequences of dividends (i.e. distribution of profits) should be recognised in profit or loss, regardless of how the tax arises.
- TAS 23 Borrowing Costs — The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings.
The amendments are effective from annual periods beginning on or after 1 January 2019. The amendments did not have a significant impact on the financial position or performance of the Group. Plan Amendment, Curtailment or Settlement” (Amendments to TAS 19) In January 2019, the POA published Amendments to TAS 19 “Plan Amendment, Curtailment or Settlement” The amendments require entities to use updated actuarial assumptions to determine current service cost and net interest for the remainder of the annual reporting period after a plan amendment, curtailment or settlement occurs. These amendments are applied for annual periods beginning on or after 1 January 2019. The amendments did not have a significant impact on the financial position or performance of the Group. Prepayment Features with Negative Compensation (Amendments to TFRS 9) The POA issued minor amendments to TFRS 9 Financial Instruments to enable companies to measure some prepayable financial assets at amortised cost. Applying TFRS 9, a company would measure a financial asset with so-called negative compensation at fair value through profit or loss. Applying the amendments, if a specific condition is met, entities will be able to measure at amortised cost some prepayable financial assets with so-called negative compensation. These amendments are applied for annual periods beginning on or after 1 January 2019. The amendments did not have a significant impact on the financial position or performance of the Group.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
29
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued) ii) Standards issued but not yet effective and not early adopted Standards, interpretations and amendments to existing standards that are issued but not yet effective up to the date of issuance of the interim consolidated financial statements are as follows. The Group will make the necessary changes if not indicated otherwise, which will be affecting the consolidated financial statements and disclosures, when the new standards and interpretations become effective. TFRS 10 and TAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments) In December 2017, POA postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting. Early application of the amendments is still permitted. The Group will wait until the final amendment to assess the impacts of the changes. TFRS 17 - The new Standard for insurance contracts The PAO issued TFRS 17 in February 2019, a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. TFRS 17 model combines a current balance sheet measurement of insurance contract liabilities with the recognition of profit over the period that services are provided. Certain changes in the estimates of future cash flows and the risk adjustment are also recognised over the period that services are provided. Entities will have an option to present the effect of changes in discount rates either in profit and loss or in OCI. The standard includes specific guidance on measurement and presentation for insurance contracts with participation features. TFRS 17 will become effective for annual reporting periods beginning on or after 1 January 2021; early application is permitted. The Standart will not have an impact on the financial position or performance of the Group. Definition of a Business (Amendments to TFRS 3) In October 2019 IASB, the PAO issued amendments to the definition of a business in TFRS 3 Business Combinations. The amendments are intended to assist entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition. The amendments: - clarify the minimum requirements for a business; - remove the assessment of whether market participants are capable of replacing any missing elements; - add guidance to help entities assess whether an acquired process is substantive; - narrow the definitions of a business and of outputs; and - introduce an optional fair value concentration test. The amendments to TFRS 3 are effective for annual reporting periods beginning on or after 1 January 2020 and apply prospectively. Earlier application is permitted. The amendments are not applicable for the Group and will not have an impact on the financial position or performance of the Group.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
30
2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (continued)
Definition of Material (Amendments to TAS 1 and TAS 8)
In October 2018 IASB, the PAO issued amendments to TAS 1 Presentation of Financial Statements and TAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’ across the standards and to clarify certain aspects of the definition. The new definition states that, ’Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The amendments clarify that materiality will depend on the nature or magnitude of information, or both. An entity will need to assess whether the information, either individually or in combination with other information, is material in the context of the financial statements.
The amendments to TAS 1 and TAS 8 are required to be applied for annual periods beginning on or after 1 January 2020. The amendments must be applied prospectively and earlier application is permitted.
The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group.
iii) The new standards, amendments and interpretations that are issued by the International Accounting Standards Board (IASB) but not issued by Public Oversight Authority (POA)
There are no standards, interpretations and amendments to existing IFRS standards issued by the IASB and not yet adapted/issued by the POA.
2.9 Significant accounting judgments and estimates
a)Reserve for retirement pay liability is determined by using actuarial assumptions such as discount rates, future salary increase and employee’s turnover rates. The estimations include significant uncertainties due to their long term nature (Note 15). b)Provision for doubtful receivables is an estimated amount that management believes to reflect possible future losses on existing receivables that have collection risk due to current economic conditions. When evaluating the impairment of receivables, past performances of borrowers other than related parties and key customers are taken into consideration in the market credibility and performance of the balance sheet date until the approval date of the financial statements. The Company has preferred to apply “simplified approach” defined in IFRS 9 for the expected credit losses. This method requires the recognition of expected life-time losses for all trade receivables. (Note 6).
c)The Group has made certain important assumptions based on experiences of technical personnel in determining useful economic life of mainly related to tangible and intangible assets (Note 11).
d)In determining of provision for litigations, the Group considers the probability of legal cases to be resulted against the Group and in case it is resulted against the Group considers its consequences based on the assessments of legal advisor (Note 13).
e)During the assessment of the reserve for obsolete inventories, inventories are physically and historically analyzed, usefulness of the inventories are determined based on the view of the technical personnel and if it is necessary, allowance is booked (Note 9).
f) The Group performs its impairment analysis on assets by using discounted cash flows. In these analyses, there are certain an assumption about discount rates used and Group’s future operations (Note 12).
g) The Group has made certain important assumptions based on experiences of technical personnel in determining provision of recultivation (Note 13). 2.10. Convenience translation into English of consolidated financial statements originally issued in Turkish
As of June, 2019, the accounting principles described in Note 2.1 (defined as Turkish Accounting Standards/Turkish Financial Reporting Standards) to the accompanying consolidated financial statements differ from International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board with respect to the application of inflation accounting, certain reclassifications and also for certain disclosures requirement of the POA/CMB. Accordingly, the accompanying consolidated financial statements are not intended to present the financial position and results of operations in accordance with IFRS.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
31
3. SHARES IN AFFILIATED UNDERTAKINGS
The assets and liabilities of Exsa, which is consolidated by the equity method, calculated by using the effective percentage of ownership as of 30 June 2019 and 31 December 2018 and revenue, expense and net profit for the periods ending 30 June 2019 and 31 December 2018 are as follows:
30 June 2019
31 December 2018
Investments Country Main operating activity
Effective ownership
(%)
Carrying net book value
Effective ownership
(%)
Carrying net book
value
Exsa Turkey Investment property and financial instruments
32,9 296.027.461 32,9 270.207.613
296.027.461 270.207.613 x
30 June 31 December
2019 2018
Assets 1.025.567.760 824.711.204
Liabilities (125.104.000) (2.786.907)
Net Assets 900.463.760 821.924.297
Group's share 296.027.461 270.207.613
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
32
3. INTERESTS IN OTHER ENTITIES (continued) 1 January- 1 April- 1 January- 1 April-
Net profit for the year 58.597.878 29.156.575 60.727.690 45.244.579
Group’s share in net profit 19.264.052 9.585.224 19.964.228 14.874.155
Information regarding the Subsidiaries in which the Group has major non-controlling interests is as follows:
30 June 2019
Non-controlling interest %
Gain/losses attributable to
non-controlling interests
Accumulated non-controlling
interests
Dividend paid to non-
controlling interests Subsidiary
Afyon Çimento Sanayi T.A.Ş. 49 (14.504.689) 104.712.059 - 31 December 2018
Non-controlling interest %
Gain/losses attributable to
non-controlling interests
Accumulated non-controlling
interests
Dividend paid to non-
controlling interests Subsidiary
Afyon Çimento Sanayi T.A.Ş. 49 (1.014.142) 119.216.748
-
Condensed financial information of subsidiary Afyon Çimento T.A.Ş. after consolidation adjustments and before eliminations is as follows:
Condensed balance sheet information: 30 June 31 December 2019 2018
Cash and cash equivalents 907.232 18.748.861 Other current assets 78.404.832 67.757.038 Non-current assets 579.565.706 571.056.758
Total assets 658.877.770 657.562.657 Short term borrowings 222.124.191 285.958.264 Other current liabilities 48.068.720 20.221.109 Long term borrowings 188.995.570 117.901.128 Other non-current liabilities 12.699.560 (10.666.751)
Total liabilities 471.888.041 413.413.750
Total equity 186.989.729 244.148.907
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
33
3. INTERESTS IN OTHER ENTITIES (continued)
Condensed income statement information:
1 January- 1 April- 1 January- 1 April-
30 June 2019 30 June 2019 30 June 2018 30 June 2018
Net financial income/(expense) (37.025.547) (17.812.588) (30.537.898) (16.671.810) Profit/(loss) before tax (42.086.517) (21.472.380) 5.844.071 10.319.333
Net profit for the period (29.545.917) (15.084.498) 4.967.964 9.561.631
Condensed cash flow information:
1 January- 1 January-
30 June 2019 30 June 2018
Cash flows from operating activities 1.756.694 39.952.347 Cash flows from investing activities 9.084.867 15.458.113 Cash flows from financing activitites (excluding dividend) (28.683.186) (116.378.922)
Net increase/(decrease) in cash and cash equivalents (17.841.625) (60.968.462)
4. SEGMENT REPORTING
Since the majority of the export sales of the Group are to the different geographic regions as one-off basis,
the distribution of sales to specific locations is not consistent between years. Therefore, the details of sales
are disclosed as domestic and export sales.
The Group manages and organizes its operations depending on the content of the services and goods
provided. The Group prepares its segment reporting in accordance with IFRS 8 “Operating Segments”
(“IFRS 8”). The transfer prices between segments are prepared on the same basis with third parties. For the
interim periods ended 30 June 2019 and 30 June 2018, the information about the Group’s segments consists
of sales and profits obtained from cement (including clinker and aggregate) and ready mix concrete and assets
and liabilities as of 30 June 2019 and 31 December 2018.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
Income from investment activities - - 17.843.935 - 17.843.935
Expense from investment activities (-) - - (1.377) - (1.377) Profit/loss from invetments accounted by equity method - - 19.964.228 - 19.964.228
Operating profit/(loss) before financial income/expense 208.204.419 (1.742.409) 24.915.366 - 231.377.376
Financial income/(expenses), net - - (83.882.141) - (83.882.141)
Profit/(loss) before tax from continuing operations 208.204.419 (1.742.409) (58.966.775) - 147.495.235
Tax (expense)/income from continuing operations - - (25.128.532) - (25.128.532)
Current period tax expense (-) - - (18.276.414) - (18.276.414) Deferred tax income/expense - - (6.852.118) - (6.852.118)
Profit/(loss) for the period from continuing operations 208.204.419 (1.742.409) (84.095.307) - 122.366.703
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
General administrative,marketing selling distribution expenses (-) (21.708.194) - (7.658.494) - (29.366.688) Other operating income/expenses (-), net 15.656.355 (59.297) (18.539.980) - (2.942.922) Research and development expenses (-) (1.864.816) - 858.144 - (1.006.672)
Income from investment activities - - 16.115.916 - 16.115.916
Expense from investment activities (-) - - (1.377) - (1.377) Profit/loss from invetments accounted by equity method - - 14.874.155 - 14.874.155
Operating profit/(loss) before financial income/expense 131.960.013 (1.257.798) 5.648.364 - 136.350.579
Financial income/(expenses), net - - (32.379.828) - (32.379.828)
Profit/(loss) before tax from continuing operations 131.960.013 (1.257.798) (26.731.464) - 103.970.751
Tax (expense)/income from continuing operations - - (16.268.473) - (16.268.473)
Current period tax expense (-) - - (13.789.898) - (13.789.898) Deferred tax income/expense - - (2.478.575) - (2.478.575)
Profit/(loss) for the period from continuing operations 131.960.013 (1.257.798) (42.999.937) - 87.702.278
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
Total liabilites 1.961.783.786 84.261.563 1.437.944.007 - 3.483.989.356
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
37
5. CASH AND CASH EQUIVALENTS
The detail of cash and cash equivalents as of 30 June 2019 and 31 December 2018 is as follows:
30 June 31 December 2019 2018
Cash 15.381 986.115
Cash and banks 170.494.602 190.650.314
Demand deposits 82.972.172 67.659.344
Time deposits with maturity of less than 3 months 87.522.430 122.990.970
Checks in collection (*) 6.193.794 10.430.918 176.703.777 202.067.347
Blocked deposites (-) (1.494.217) (430.708)
Cash and cash equivalents in consolidated cash flow statement 175.209.560 201.636.639
(*) As of 30 June 2019 checks in collection consist of overdue and outstanding checks.
The detail of demand deposits is stated below: 30 June 31 December
2019 2018
Turkish Lira 48.875.850 94.529.770
US Dollar 73.338.384 52.688.506
Euro 47.250.960 39.860.033
British Pound 302.130 2.116.863
Other 727.278 1.455.142
170.494.602 190.650.314
Time deposits as of 30 June 2019 is denominated in TRY with the maturity of less than three months and
effective weighted average interest rate on time deposits is 25,85%, and 1% for US Dollar. (31 December
2018: 22,33%). As of 30 June 2019, the blocked deposit amount is TRY 1.494.217. (As of 31 December
2018, the amount of blocked deposits is TRY 430.708.)
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
38
6. TRADE RECEIVABLES AND PAYABLES
a. Trade Receivables 30 June 31 December
Short-term trade receivables 2019 2018
Trade receivables 448.683.241 347.614.616
Notes receivable 62.851.966 106.381.838
Due from related parties (Note 26) 1.270.682 18.497
Allowance for doubtful receivables (-) (19.996.861) (18.698.305)
492.809.028 435.316.646
Trade receivables’ collection terms vary based on the type of the product and agreements made with the
customers and the average term is 93 days (31 December 2018- 96 days). Effective interest rates used when
determining the amortized cost are 15,62% for TRY, 4,74% for USD and 2,16% for EUR (31 December
2018 - TRY: TRY:19,03%, USD: 4,79%, EUR: 2,47%).
The movement of the provision for doubtful receivables for the periods ended 30 June 2019 and 31 December
2018 is as follows:
1 January- 1 January-
Allowance for doubtful receivables (-) 30 June 2019 30 June 2018
Opening balance 18.698.305 10.764.929
Provisions during the period (Note 21) 937.387 201.128
Reversal of the provision (-) (Note 21) - (4.781)
Currency translation difference 361.169 434.509
Closing balance 19.996.861 11.395.785
The balance of the long-term trade receivables for the periods ended 30 June 2019 and 31 December 2018 is
as follows: 30 June 31 December
Long-term trade receivables 2019 2018
Long-term trade receivables 700.600
700.600 700.600 700.600
b. Trade Payables
30 June 31 December
Short-term trade payables 2019 2018
Trade payables 274.531.244 237.493.781
Trade payables to related parties (Note 26) 92.402.356 58.574.646
366.933.600 296.068.427
The average payment period of trade payables is 84 days (31 December 2018: 74 days). Effective interest
rates used when determining the amortized cost are 15,62% for TRY, 4,74% for USD and 2,16% for EUR
(31 December 2018 - TRY: 19,03%, USD: 4,79%, EUR 2,47%).
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
39
7. FINANCIAL BORROWINGS
The detail of Group’s financial borrowings as of the balance sheet date is stated below:
30 June 31 December Borrowings 2019 2018 Short-term borrowings 869.281.666 788.523.502 Current portion of long-term borrowings 257.338.317 240.587.041 Short-term financial liabilities 4.218.701 - Short-term issued bonds 27.511.135 -
(*) Çimsa has made interest rate swap transaction in order to its cash flow risk for the long term loan of 35.588.236 EUR with floating interest rate. Maturity date of this transaction is 29 March 2022, financial risk hedge accounting applied and accounted under equity.
The details of the borrowings and financial lease liabilities as of 31 December 2018 are as follows: b
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
40
7. FINANCIAL BORROWINGS (continued) The repayment schedule of the borrowings as of 30 June 2019 and 31 December 2018 is as follows:
30 June 2019 31 December 2018
To be paid within 1 year 1.154.131.118 1.029.110.543 To be paid between 1-2 years 430.048.107 263.350.657 To be paid between 2-3 years 102.030.718 98.817.384 To be paid between 3-4 years - 89.193.168 To be paid between 4-5 years - - More than 5 years - -
1.686.209.943 1.480.471.752
The Company issued bonds with a nominal value of TRY 150,000,000 and a 728 day maturity, floating interest rate and
3 month maturity, indexed to the Turkish Lira Reference Interest Sales Rate. The value date of the issue is 21 March
2019 and the redemption date is 18 March 2021. The second coupon payment interest of the bond to be made on 19
September 2019 was determined as 6,7926 %.
8. OTHER RECEIVABLES AND OTHER PAYABLES
a. Other Receivables
30 June 31 December
Short-term other receivables from third parties 2019 2018
Other miscellaneous receivables 1.854.561 897.747
Due from personnel 764.320 600.597
Receivables from insurance claims 892.692 600.526
Provision for doubtful other receivables (-) (753.646) (753.646)
2.757.927 1.345.224
30 June 31 December
Short-term other receivables 2019 2018
Short-term other receivables from related parties (Note 26) 228.723 248.597
228.723 248.597
30 June 31 December
Long-term other receivables 2019 2018
Deposits and guarantees given 3.997.777 3.682.965
3.997.777 3.682.965
a. Other Payables
30 June 31 December
Short-term other payables 2019 2018
Deposits and guarantees received 8.660.584 8.690.040
Taxes and funds payable 2.692.881 3.003.942
Other payables to related parties (Note 26) 736.936 1.572.923
12.090.401 13.266.905
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
Reversal of the provision (-) (Note 20) - (116.818)
Currency translation differences 4.646 -
Closing balance 4.350.790 3.757.550
The Group allocates an allowance for the impairment on the inventories of finished goods, work in progress
and raw materials in the cases when their net realizable values are lower than their costs or when they are
classified as slow moving inventories. The provision has been recognized under cost of sales.
10. PREPAID EXPENSES AND DEFERRED INCOME
a. Prepaid Expenses
30 June 31 December
Short-term provision expenses 2019 2018
Prepaid expenses 9.815.911 4.525.614
Advances given to suppliers 2.788.022 5.013.739
12.603.933 9.539.353
30 June 31 December
Long-term provision expenses 2019 2018
Advances given for the purchase of fixed assets 1.004.306 844.373
Prepaid expenses 61.039 68.598
1.065.345 912.971
b. Deferred Income
30 June 31 December
Short-term deferred income 2019 2018
Advanced received 24.172.317 12.804.558
Prepaid expenses 3.364.382 2.585.018
27.536.699 15.389.576
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
42
11. PROPERTY, PLANT AND EQUIPMENT AND OTHER INTANGIBLE ASSETS
The amount of tangible and intangible assets purchased for the period ending as of 30 June 2019 is TRY
134.899.093 (30 June 2018: TRY 108.761.779).
The net book value of tangible and intangible assets sold for the period ending as of 30 June 2019 is TRY
8.525.295 (30 June 2018: TRY 4.468.278).
For the period ending as of 30 June 2019 cost of goods sold contain depreciation and amortisation expenses
of TRY 63.040.650 (30 June 2018: TRY 48.319.849), general and administrative expenses contain
depreciation and amortisation expenses of TRY 1.194.992 (30 June 2018: TRY 1.054.106) and sales and
distribution expenses contain depreciation and amortisation expenses of TRY 121.784 (30 June 2018: TRY
115.603) and research and development expenses contain depreciation and amortisation expenses of TRY
50.915 (30 June 2018: TRY 41.207)
As of 30 June 2019, the Group has pledges or/and mortgages on its assets amounting to TRY 11.875.109 (31
December 2018: TRY 28.288.198).
For the period ended 30 June 2019, depreciation expense amounting to TRY 3.611.699 has been included in
cost of goods sold and TRY 2.422.368 has been included in general administrative expenses.
As of 30 June 2019, the Group net capitalized financing expenses on construction in progress are TRY
5.058.493 (30 June 2018: TRY 10.000.775).
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
43
12. GOODWILL
The goodwill amount presented in the Group’s financial statements as of 30 June 2019 is related to Eskişehir
and Ankara Cement Factories (“Standart Çimento”) acquired in 2005, Çimsa Cement located in TRNC,
Bilecik Ready Mix Cement Facilities acquired in 2008, Afyon Çimento Sanayi Türk Anonim Şirketi acquired
in 2012 and Cırgalan Ready-Mixed Concrete Facility acquired in 2018. The movement of goodwill for the
periods ending 30 June 2019 and 31 December 2018 is stated below.
30 June 2019 Opening
Effect of the
acquired
subsidiary
Currency
Translation
Differences Total
Eskişehir 132.140.806 - - 132.140.806
Afyon Çimento Sanayi T.A.Ş. 11.358.393 - - 11.358.393
Impairment is determined by assessing the recoverable amount of the cash-generating unit, to which the goodwill relates annually or more frequently if events or changes in circumstances indicate that the carrying value may be impair. Recoverable amount of the cash-generating unit is determined less than the carrying amounts of the net assets assigned to the cash-generating unit, an impairment loss is recognized. Recoverable amount is calculated between the dates of 1 January 2019 and 31 December 2023 through 5 years business plan which is approved by the management. The main assumptions used in the discounted cash flow considers 20% the weighted average cost of capital (WACC) and sales price and cost price increases in line with macroeconomic estimations. As a result of assessment, the recoverable amount of goodwill exceeded its carrying amount and therefore no impairment has been identified as of December 31, 2018. Cırgalan ready-mix concrete facility is purchased with the amount of TRY 4.640.259, the valuation of
goodwill amounting to TRY 3.705.259 after emerging held for property has been accounted in the Group's
consolidated balance sheet. According to IFRS 3 Business Combinations Standard, the Group have accounted
the provisional value due to the determination of the completion of the initial recognition process according
to the combinations. In subsequent periods of the initial recognition, an impairment test will be performed
for the cash-generating units for the respective groups.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
44
13. PROVISION, CONTINGENT ASSETS AND LIABILITIES
a. Short-Term Provisions
As of 30 June 2019, there is no bonus and premium provisions. (31 December 2018: TRY 3.428.000)
30 June 31 December
Short-term provisions 2019 2018
Provision for litigations 18.555.788 16.828.717
Short-term provisions for employee benefits - 3.428.000
18.555.788 20.256.717
The movement of “Provision for the litigations” as of 30 June 2019 and 30 June 2018 is stated below:
30 June 30 June
Provision for the litigation movement 2019 2018
Opening balance 16.828.717
14.930.295
Additional provision (Note 21) 1.730.966
891.748
Provision paid during the period (-)(Note 21) (3.895) (492.228)
Closing balance 18.555.788 15.329.815
As of June 30, 2019, the Group has provided provision amounting to TRY 18.555.788 for the risky cases
against the Company with the opinion obtained from the Company’s legal counsels. (June 30, 2018: TRY
16.828.717)
b. Long-Term Provisions
30 June 31 December
Long-term provisions 2019 2018
Long-term employee benefits 41.306.053 33.842.645
Other long term provisions 4.285.895 4.260.089
45.591.948 38.102.734
30 June 31 December
Other long term provisions 2019 2018
Recultivation provision 4.285.895 4.260.089
4.285.895 4.260.089
The operations of the Group such as mining, cement productions are subject to the Environment Law, and to
the Land Protection and Utilization Law. All liabilities such as taxes, duties and emission fees resulting from
this legislation have been fulfilled by the Group. This legislation addresses the costs that could arise from
recovering the damage, pollution in the land while vacating the mines. Accordingly, the management
calculated the estimated cost of plans that is deemed to meet the requirements of legislation related with the
mining areas in which the Group operates. The Group has accounted and disclosed the recultivation provision
amounting to TRY 4.285.895 under “Other Long-Term Provisions” as of 30 June 2019 (31 December 2018:
TRY 4.260.089).
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
45
13. PROVISION, CONTINGENT ASSETS AND LIABILITIES (continued)
The movement of “the recultivation provision” as of 30 June 2019 and 30 June 2018 is as follows: 30 June 30 June
Recultivation provision movement 2019 2018
Opening balance 4.260.089 4.612.793
Additional provision (Note 21) 547.910 647.718
Provision no longer required (-) (Note 21) (522.104) -
Closing balance 4.285.895 5.260.511
14. COMMITMENTS
The collaterals, pledges and mortgages (CPM) received by the Group as of 30 June 2019 and 31 December
2018 are as follows:
30 June 2019 31 December 2018
Original
Currency Original
Amount TRY Balance Original
Amount TRY Balance
Guarantee letter received TRY 366.058.604 366.058.604 408.959.306 408.959.306
Guarantee letter received USD 20.926.871 120.436.237 23.711.521 124.743.942
Guarantee letter received Euro 11.154.168 73.067.610 11.399.414 68.715.670 Guarantee letter received Other 26.000 26.000 26.000 26.000
Mortgages received TRY 33.742.923 33.742.923 34.306.423 34.306.423
Mortgages received Euro 592.906 3.883.949 592.906 3.574.037 Mortgages received Rub 175.174.835 15.898.868 175.174.835 13.197.672
Checks and notes received TRY 19.712.262 19.712.262 19.742.262 19.742.262
Checks and notes received Euro 70.000 458.549 70.000 421.960
Checks and notes received USD 47.300 272.216 47.300 248.841
As of 30 June 2019 and 31 December 2018, the details of the CPM given are as follows:
30 June 2019 31 December 2018
Currency Original
TRY
Amount Original
TRY
Amount
A. Total CPM given for the Cornpany’s own legal cntity TRY 21.511.793 21.511.793 21.486.720 21.486.720
USD 21.600.004 124.310.183 21.148.223 111.258.686
EUR 2.086.275 13.666.562 4.966.275 29.936.706
B. Total CPM giyen in favoor of subsidiaries consolidated on line-by-line basis
- - - -
C. Total CPM giyen in favour of other 3rd parties for
ordinaı trading operaüons - - - -
D. Other CPM giyen - - - -
i. Tolal CPM giyen in favour of parent entity - - - -
ii. Toıal CPM giyen in favour of olber Group cornpanies not of scope ofclause B and C
- - - -
iii. Total CPM giyen in favour of other 3rd parties
out of scope of clause C - - - -
159.488.538 162.682.112
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
46
15. EMPLOYEE BENEFITS
a. Employee Benefit Obligations 30 June 31 December 2019 2018
Social security payables 7.056.975 2.624.202
Wage and salary payables to personnel 3.102.505 731.667
Personnel witholding tax 2.943.060 2.710.908
13.102.540 6.066.777
b. Long Term Employee Benefits 30 June 31 December 2019 2018
Retirement pay provision 34.880.810 29.122.963
Provision for unpaid vacation liability 5.017.674 3.637.726
Seniority provision 1.407.569 1.081.956
41.306.053 33.842.645
The movement of “Retirement Pay Provision” for the period ended 30 June 2019 and 30 June 2018 is stated
below:
1 January- 1 January -
30 June 2019 30 June 2018
Opening balance 29.122.963
28.261.383
Service cost 6.938.031
4.072.296
Interest cost 710.207
517.176
Actuarial loss / (gain) (1.994.367)
819.666
Provision paid during the period (2.145.606)
(2.571.642)
Currency translation difference 2.249.582
178.124
Closing balance 34.880.810 31.277.003
In accordance with the existing social legislation in Turkey, the Group is required to make lump-sum
termination indemnities to each employee who has completed over one year of service with the Group and
whose employment is terminated due to retirement or for reasons other than resignation or misconduct.
Such payments are calculated on the basis of one month’s pay limited to a maximum of full TRY 6.017,60
as of 30 June 2019 (31 December 2018: full TRY 5.434,42).
In the consolidated financial statements dated 30 June 2019 and 31 December 2018, the actuarial assumptions
used in calculating the severance pay liability are as follows:
30 June 31 December
2019 2018
Discount rate 5,10% 5,1%
Employee turnover rate 3,77% 3,73%
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
47
15. EMPLOYEE BENEFITS (continued)
The movement of provision for unpaid vacation liabilty in the period is stated below:
1 January - 1 January -
30 June 2019 30 June 2018
3.637.726 Opening balance 3.637.726
3.784.774
Additional provision 1.810.464
1.197.334
Provision paid during the period (444.470)
(234.966)
Currency translation difference 13.954
14.817
Closing balance 5.017.674 4.761.959
The movement of “seniorty provision” in the period is stated below:
1 January - 1 January - 30 June 2019 30 June 2018
Opening balance 1.081.956 727.409
Additional provision 530.070 203.630 Provision paid during the period (204.457)
(5.132) Closing balance 1.407.569 925.907
16. OTHER ASSETS AND LIABILITIES
a. Other Assets
30 June 31 December
Other current assets 2019 2018
Deferred VAT (1) 92.516.748 72.343.398
Job and personnel advances 1.906.462 800.807
Other current assets 6.842.555 3.014.861
101.265.765 76.159.066
30 June 31 December
Other non-current assets 2019 2018
Deferred VAT (2) 35.398.302 13.920.096
Export VAT (3) 4.197.146 3.902.117
Other non-current assets 12.403 2.154
39.607.851 17.824.367
(1) According to the estimates of the Group, the portion to be deducted from the VAT payables to be paid within one year is reclassified to other current assets. (2) According to the Group's estimations, the portion of the transferred VAT of Afyon Çimento T.A.Ş which will be deducted over a year is classified as long term. (31 December 2018: TRY 13.920.096). (3) According to VAT Law no 11/c, the VAT amount regarding to the goods which are rendered to export dealers by manufacturers is not collected, and are recorded to export VAT and deferred VAT accounts. Uncollected VAT is declared on related VAT declaration; accrued VAT is deferred and recorded to deferred VAT accounts. After verification of the realization of export, tax administration makes cancellation for the deferred VAT.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
48
16. OTHER ASSETS AND LIABILITIES (continued) b. Other Liabilities
30 June 31 December 2019 2018 Other short term liabilities 20.978.635 8.575.707
20.978.635 8.575.707
17. EQUITY, RESERVES AND OTHER EQUITY ITEMS
As of 30 June 2019 and 31 December 2018, the composition of shareholders is as follows:
30 June 2019 31 December 2018
Shareholders (*) (%) Amount (%) Amount
Hacı Ömer Sabancı Holding A.Ş. 54,54 73.674.201 54,54 73.674.201
Akçansa Çimento San. ve Tic. A.Ş. 8,98 12.130.560 8,98 12.130.560
Hacı Ömer Sabancı Vakfı 0,11 150.000 0,11 150.000
Other shareholders 36,37 49.129.681 36,37 49.129.681
Nominal share capital 100 135.084.442 100 135.084.442
Inflation adjustment 41.741.516 41.741.516
Rearranged share capital 176.825.958 176.825.958
(*) Public quotation of the Group is 36,48% as of 30 June 2019 (31 December 2018: 36,48%). (**) Aberdeen Asset Management Limited holds 7,91 % of the total capital as being the discretionary portfolio
manager of the managed multiple portfolios (31 December 2018: %9,07).
As of June 30, 2019, the Company's capital is composed of 135.084.442 units (31 December 2018: 135.084.442). The nominal value of the shares is 1 TRY per share (31 December 2018: 1 TRY per share).
Legal reserves
The legal reserves consist of first and second legal reserves in accordance with the Turkish Commercial
Code. The first legal reserve is appropriated out of the statutory profits at the rate of 5%, until the total reserve
reaches a maximum of 20% of the Group’s share capital. The second legal reserve is appropriated at the rate
of 10% of all distributions in excess of 5% of the Group’s share capital. The legal reserves are not available
for distribution unless they exceed 50% of the issued capital, other than that legal reserves can not be used.
Retained earnings
The Ordinary General Assembly of 2017 has been held on 27 March 2018, the decisions to pay TRY 67.542.221 of dividend and to allocate TRY 6.078.800 of “Legal reserves” and TRY 154.730.921 “Extraordinary reserves” were unanimously approved, was decided to pay as of 29 March 2018.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
49
17. EQUITY, RESERVES AND OTHER EQUITY ITEMS (continued)
Profit Distribution
Listed companies distribute dividend in accordance with the Communiqué No. II-19.1 issued by the CMB which is effective from 1 February 2014.
Companies distribute dividends in accordance with their dividend payment policies settled and dividend
payment decision taken in general assembly and also in conformity with relevant legislations. The
communiqué does not constitute a minimum dividend rate. Companies distribute dividend in accordance with
the method defined in their dividend policy or articles of incorporation. In addition, dividend can be
distributed by fixed or variable instalments and advance dividend can be paid in accordance with profit on
interim financial statements of the Company.
Companies should include at least the following in their profit distribution policies:
a) Whether dividends will be distributed, and if distributed, the dividend distribution rate for shareholders and for others participating in the distribution.
b) Payment type of dividend distribution. c) Time of dividend distribution; on condition that the distribution procedures to be started at the latest of
the end of the annual period in which general assembly meeting was held in which the distribution was agreed upon.
d) Whether dividend advances will be distributed, and if distributed, the related principles.
In accordance with the Turkish Commercial Code (TCC), unless the required reserves and the dividend for shareholders as determined in the article of association or in the dividend distribution policy of the company are set aside, no decision may be made to set aside other reserves, to transfer profits to the subsequent year or to distribute dividends to the holders of usufruct right certificates, to the members of the board of directors or to the employees; and no dividend can be distributed to these persons unless the determined dividend for shareholders is paid in cash.
Foreign currency translation differences
According to TAS 21 “Effects of Changes in Foreign Exchange Rates”, during the consolidation, the assets and liabilities of Group’s subsidiaries and joint ventures in foreign countries are translated to Turkish Lira with respect to the exchange rates on the balance sheet date. Income and expense items are translated via the average exchange rates. The differences emerged as a result of using the closing and average exchange rates are accounted for as foreign currency translation differences in the comprehensive statement of income. Non- controlling interests
All non-controlling shares are eliminated from the equity accounts, including paid-in capital, of the consolidated subsidiaries and presented as a non-controlling interest in shareholders’ equity in the consolidated balance sheet.
Available for sales financial assets revaluation reserve
Exsa, which is the Group’s investment accounted by equity method, purchased shares of Hacı Ömer Sabancı
Holding A.Ş. Those shares are classified as available for sale financial assets in financial statements and
accounted in available for sales financial assets revaluation reserve under shareholders’ equity by taking into
consideration its deferred tax effect.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
50
18. DERIVATIVE FINANCIAL INSTRUMENTS 30 June 2019 31 December 2018
Fair Value Fair value
Contract
Amount Assets Liabilities
Contract
Amount Assets Liabilities Short term derivative financial instruments Hedging against impaired risk Cross Currency Swap - - - 90.420.000 - 22.000.136
Total derivative financial instruments 65.681.678 63.511.131 79.843.539 97.498.489
As of June 30, 2019, the Group has realized 35,5 million sell Euro buy Turkish Lira forward transaction with maturity
of 4 years expired on March 29, 2022 and with the same forward, the Group has protected a portion of its sales by
foreign exchange forward contracts. Changes arising from forward transactions are recognized in the statement of
change in shareholder’s equity considering the deferred tax effect.
As of June 30, 2019, the Group has realized 35,5 million Euro nominal value sell Turkish lira buy Euro forward
transaction with maturity of 4 years expired on March 29, 2022. Changes arising from forward transactions are
recognized in the consolidated statement of profit and loss.
As of June 30, 2019, interest rate swap transactions consist of swap transactions in which Çimsa’s long term borrowings
of 35,5 million Euro of floating rates are replaced with fixed installment payments to hedge against cash flow risk.
Changes arising from interest rate swap transactions are recognized in the statement of change in shareholder’s equity
considering the deferred tax effect.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
51
19. REVENUE
Sales 1 January – 1 April – 1 January – 1 April –
30 June 2019 30 June 2019 30 June 2018 30 June 2018
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
52
20. OPERATING EXPENSES BY NATURE (continued)
The detail of marketing, selling and distribution expense for the periods between 1 January – 30 June 2019
and 2018 is as follows:
Marketing, selling and distribution expenses
1 January - 1 April - 1 January - 1 April - 30 June 2019 30 June 2019 30 June 2018 30 June 2018
Other operating income 30 June 2019 30 June 2019 30 June 2018 30 June 2018
Foreign exchange gain from operating
activities
46.888.259
21.192.522
36.373.588
12.051.138
Insurance damage compensation income 8.489.204 8.489.204 - -
Overdue and interest income from operating
activities
1.718.067 1.303.885
614.769
256.381
Sales of scrap and miscellaneous material 1.018.894 293.124 857.864 347.583
Provisions no longer required (Not 6/13) 525.999 265.792 497.009 493.563
Incentive premiums received - - 138.936 135.755
Other income 2.407.955 1.725.474 1.305.379 135.755 61.048.378 33.270.001 39.787.545 13.420.175
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
53
21. OTHER OPERATING INCOME AND EXPENSES (continued)
Other operating expense
1 January - 1 April - 1 January - 1 April -
30 June 2019 30 June 2019 30 June 2018 30 June 2018
Foreign exchange loss from operating activities (37.195.706) (25.261.763) (12.023.679) (9.430.840)
Other financial expenses (2.422.950) (2.127.512) (692.987) (286.817)
Total financial expenses (151.223.634) (85.428.027) (84.841.321) (32.680.535)
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
54
24. INCOME TAXES
The Group is subject to taxation in accordance with the tax procedures and the legislation effective in the
countries where the Group is operating.
The tax expense for the year comprises current and deferred tax. Tax is recognised in the income statement,
except to the extent that it relates to items recognised directly in equity. In such case, the tax is also recognised
in shareholders’ equity.
The current income tax charge is calculated in accordance with the tax laws enacted or substantively enacted
at the balance sheet date in the countries where the subsidiaries and associates of the Group operate. Under
the Turkish Tax Code, companies having head office or place of business in Turkey are subject to corporate
tax.
Under the Turkish taxation system, tax losses can be carried forward to be offset against future taxable
income for five years. Tax losses cannot retrospectively offset against the profits of previous years.
Furthermore, provisional corporate taxes are paid at 22% over profits declared for interim periods in order to
be deducted from the final corporate tax.
As of June 30, 2019 and 2018, income tax provisions have been accrued in accordance with the prevailing
tax legislation.
75% of the income derived by the Company from the sale of participation shares, preferential rights, founders'
shares and redeemed shares and 50% of the income derived by the Company from the sale of immovable
property which are carried in assets for at least for two years is exempt from corporate tax with the condition
that the relevant income should be added to the share capital or kept under a special reserve account under
equity for 5 years in accordance with the Corporate Tax Law.
Deferred income tax is provided in full, using the liability method, on all temporary differences arising
between the tax bases of assets and liabilities and their carrying values in the consolidated financial
statements. Currently enacted tax rates are used to determine deferred income tax at the balance sheet date.
Since the applicable tax rate has been changed to 22% for the 3 years beginning from 1 January 2018, 22% tax
rate is used in the deferred tax calculation of 30 June 2018 for the temporary differences expected to be
realized/closed within 3 years (for the years 2018, 2019 and 2020). However, since the corporate tax rate after
2020 is 20%, 20% tax rate is used for the temporary differences expected to be realized/closed after 2020.
Deferred tax liabilities are recognized for all taxable temporary differences, where deferred tax assets resulting
from deductible temporary differences are recognized to the extent that it is probable that future taxable profit
will be available against which the deductible temporary difference can be utilized.
Provided that deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation
authority and it is legally eligible, they may be offset against one another.
In Turkey, the corporate tax rate is 20%. However, in accordance with the addition of temporary 10th article
to the Corporate Tax Law, 22% corporate tax rate will be applied to the profits of the entities related to their
to 2018, 2019 and 2020 tax periods (for the entities with special accounting period, tax periods commenced
in the related year) rather than 20%. This rate is applicable to the tax base derived upon exemptions and
deductions stated in the tax legislation and by addition of disallowable expenses to the commercial revenues
of the companies with respect to the tax legislation. Corporate tax is required to be filed by the twenty-fifth
day of the fourth month following the balance sheet date and taxes must be paid by the end of the fourth
month.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
55
24. INCOME TAXES (continued)
The tax legislation provides for a temporary tax of 20% (will be applied as 22% for 2018, 2019 and 2020 tax
periods) to be calculated based on earnings generated for each quarter. Temporary tax is declared by the 14th
day of the second month following each quarter and corresponding tax is payable by the 17th day of the same
month. The amounts thus calculated and paid are offset against the final corporate tax liability for the year.
If there is excess temporary tax paid even if it is already offset, this amount may be refunded or offset.
Corporate tax losses can be carried forward for a maximum period of 5 years following the year in which the
losses were incurred. The tax authorities can inspect tax returns and the related accounting records for a
retrospective maximum period of five years.
15% withholding applies to dividends distributed by resident real persons, those who are not liable to income
and corporation tax, non-resident real persons, non-resident corporations (excluding those that acquire
dividend through a permanent establishment or permanent representative in Turkey) and non-resident
corporations exempted from income and corporation tax.
Dividend distribution by resident corporations to resident corporations is not subject to a withholding tax.
Furthermore, in the event the profit is not distributed or included in capital, no withholding tax shall be
applicable.
Turkish tax legislation does not permit a parent company and its subsidiaries to file a consolidated tax return.
Therefore, tax liabilities, as reflected in these consolidated financial statements, have been calculated on a
separate-entity basis. As of June 30, 2019 and December 31, 2018 current income tax payables have been
offset against the prepaid taxes in entity basis but such offset amounts have been classified in gross basis in
the consolidated financial statement.
In accordance with the “General Communiqué” (Serial no:1) on “Disguised Profit Distribution Through
Transfer Pricing” was published in November 2007, the forms should be prepared until the deadline of annual
corporate tax return.
As of 30 June 2019 and 31 December 2018, corporate tax payables are summarized as follows:
30 June 31 December
Assets related to the current period taxes 2019 2018
Prepaid taxes and funds 717.662 2.526.430
717.662 2.526.430
30 June 31 December
Corporate tax payable 2019 2018
Current period corporate tax provision (6.109.755) (11.217.802)
Prepaid taxes and funds (-) 647.063 5.106.303
(5.462.692) (6.111.499)
1 January –
1 April –
1 January – 1 April –
Tax expense 30 June 2019 30 June 2019 30 June 2018 30 June 2018
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
56
24. INCOME TAXES (continued)
The details of the deferred tax assets and liabilities of the Group as of 30 June 2019 and 31 December 2018
are as follows:
30 June 31 December
Deferred tax assets 2019 2018
Tax losses carried forward 19.214.796 9.686.657
Provision for employee benefits 7.580.510 7.764.268
Recultivation provision 857.179 805.203
Provision for other doubtful receivables 1.783.572 1.792.720
Investment allowance 8.570.518 5.110.370
Provision for litigations 4.066.353 3.685.602
Fair value of derivative financial instruments - 3.049.594
Inventory impairment provision 981.436 755.307
Rediscount of receivables 41.927 272.248
Other 5.539.056 3.673.448
48.635.347 36.595.417
Deferred tax liabilities
Goodwill (24.663.427) (24.589.322)
Property, plant and equipment and intangible assets (21.288.401) (20.677.588)
Fair value of derivative instruments 2.430.909 -
Rediscount of payables and borrowings (1.124.534) (1.289.005)
Other (369.715) -
(45.015.168) (46.555.915)
Net deferred tax asset / (liability) 3.620.179 (9.960.498)
Accounted under other comprehensive income 10.247.574 (15.045.046)
Currency translation difference and other (2.300.068) 4.980.215
Closing balance (3.620.179) 22.623.027
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
57
24. INCOME TAXES (continued)
Tax reconciliation: 30 June
2019
30 June
2018
Profit before taxation (5.770.807) 147.495.235
Effective statutory income tax rate %22 %22
Tax expense at the effective statutory income tax rate 1.269.578 (32.448.952)
Reconciliation of tax provision calculated with deductible:
-Non-deductible expenses (453.552) (376.931)
-Investment allowance 8.570.518 2.395.332
-Tax exemption from sale of Afyon land 2.916.357 2.067.757
-Effect of the profit from investments accounted by equity method 4.238.091 4.392.130
-Other (1.237.980) 1.792.037
Tax expense in the income statement 15.418.428 (25.128.532)
“The Law on Amendment to Certain Laws and Decree Laws" (Law No: 6637) has been promulgated in the Official
Gazette dated 7 April 2015 and the Article will enter into force as from 1 July 2015. Capital companies are allowed a
deemed interest deduction that is equal to 50% of the interest calculated on the cash capital increase in the registered
capital of the existing corporations or cash capital contributions of the newly incorporated corporations based on the
average interest rate announced by the Central Bank of Turkey for TRY denominated commercial loans, from their
Corporate tax base of the relevant year. Within the scope of the authorization provision in the legal regulation, the
Council of Ministers amended this rate with the Decision no. 2015/7910 published in the Official Gazette dated 31
December 2016. Accordingly, the deduction will be applied as follows;
a) For publicly held capital companies whose shares are traded in the stock exchange, 25 points will be added to 50%
rate where the ratio of the nominal value of shares followed up as tradable shares in the stock exchange by Merkezi
Kayıt Kuruluşu A.Ş. to the registered paid-in or removed capital is 50% or less as of the last day of the year when the
deduction is benefited from, 50 points will be added to 50% rate where the above-mentioned ratio is above 50%.
b) If the capital increased in cash is used in production and industry plants with investment incentive certificates and
investments of machines and equipments pertaining to these plants and/or investments of lands and plots allocated to
construction of these plants, the deduction in question will be applied by adding 25 points to the 50% rate stated above,
as limited to the fixed investment amount in the investment incentive certificate.
25. EARNINGS PER SHARE
Earnings per share (EPS) is calculated by dividing the net profit for the period attributable to the ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
1 January - 1 April - 1 January - 1 April - 30 June 2019 30 June 2019 30 June 2018 30 June 2018
Number of shares 135.084.442 135.084.442 135.084.442 135.084.442
Profit attributable to equity holders of the parent–TRY 23.201.464 5.009.290 117.436.245 80.293.070
Dividend per share with nominal value of 1 Kr–TRY 0,1718 0,0371 0,8694 0,5944
Dividend distributed per share:
The dividend per share distributed in 2018 from 2017 profit is stated below:
Dividend amount distributed 67.542.221
WWeighted average number of shares 135.084.442
Dividend per share 0,5000
There have been no other transactions involving ordinary shares or potential ordinary shares since the
reporting date and before the completion of these financial statements.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
58
26. RELATED PARTY DISCLOSURES
Entities are defined as related if one of the entities has control over the other entity or has a significant influence over the other entity’s financial and administrative decisions. The Group is controlled by Hacı Ömer Sabancı Holding A.Ş. For the consolidated financial statements, shareholder companies and financial assets of Hacı Ömer Sabancı Holding A.Ş. and their associates and subsidiaries and also other companies of Sabancı Group are presented separately and these companies and top management of the Group are referred to as related parties. The Group has various transactions with related parties. The related party balances as of 30 June 2019 and 31 December 2018 and the related party transactions for the interim periods ended 30 June 2019 and 31 December 2018 are mainly as follows: Short term trade receivables from related parties 30 June 31 December
2019 2018
Akçansa Çimento Sanayi ve Ticaret A.Ş.(3) 1.270.682 3.100
Enerjisa Enerji A.Ş. (2) - 10.177
Teknosa (2) - 5.220
1.270.682 18.497
Short term other receivables from related parties 30 June 31 December
2019 2018
Ak Finansal Kiralama A.Ş. 228.723 223.504
Avivasa Emeklilik Hayat A.Ş. (3) - 25.093
228.723 248.597
(1) Parent company
(2) Subsidiary of the parent company; Hacı Ömer Sabancı Holding A.Ş.
(3) Joint venture of the parent company; Hacı Ömer Sabancı Holding A.Ş.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
59
26. RELATED PARTY DISCLOSURES (continued)
Short term trade payables to related parties 30 June 31 December 2019 2018
Enerjisa Enerji A.Ş. (2) 92.402.356 58.562.205
Akçansa Çimento Sanayi ve Ticaret A.Ş.(3) - 12.441
92.402.356 58.574.646
Short term other payables to related parties 30 June 31 December 2019 2018
Bimsa Uluslararı İş Bilgi ve Yön. Sistemleri A.Ş. (2) 382.417 1.319.525
Aksigorta A.Ş. (3) 47.621 3.504
Teknosa (3) 56.457 64.390
Other 250.441
185.504
736.936 1.572.923
Bank balances deposited in related parties 30 June 31 December 2019 2018
Akbank T.A.Ş. (2) 145.889.789 199.233.840
145.889.789 199.233.840
Borrowings from related parties 30 June 31 December 2019 2018
Akbank T.A.Ş. bank borrowings (2) 201.810.008 283.145.528
201.810.008 283.145.528
Sales to related parties
1 January - 1 April - 1 January - 1 April -
30 June 2019 30 June 2019 30 June 2018 30 June 2018
Akçansa Çimento Sanayi ve Ticaret A.Ş. (3) 1.858.838
1.858.838 1.847.143 648.119 648.119
Ak Finansal Kiralama 1.325.869
1.325.869
1.325.869
1
.
3
2
5
.
8
6
9
1.325.869 - -
Bimsa
754.000 754.000 14.937 9.037
Enerjisa Enerji A.Ş. (2) 355.672 - - -
Teknosa (3) 103.828 - - -
Other 104.660 104.363 - - 4.502.867 4.031.375 663.056 657.156
(1) Parent company
(2) Subsidiary of the parent company; Hacı Ömer Sabancı Holding A.Ş.
(3) Joint venture of the parent company; Hacı Ömer Sabancı Holding A.Ş.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
60
26. RELATED PARTY DISCLOSURES (continued)
Purchases and services received from related parties
1 January - 1 April - 1 January - 1 April -
30 June 2019 30 June 2019 30 June 2018 30 June 2018
Enerjisa Enerji A.Ş. (3) 95.781.684 73.826.981 49.994.000 35.379.000
Total amount of compensation benefits paid to the Chairman and the members of the Board of Directors,
general manager, general coordinator and deputy general managers, is TRY 5.793.705 (30 June 2018 – TRY
7.787.480). The contributions paid to Social Security Institution are TRY 455.993 (30 June 2018 – TRY
616.634).
(1) Parent company
(2) Subsidiary of the parent company; Hacı Ömer Sabancı Holding A.Ş.
(3) Joint venture of the parent company; Hacı Ömer Sabancı Holding A.Ş.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
61
27. FOREIGN CURRENCY RISK
As of 30 June 2019 and 31 December 2018, the Group’s foreign currency position in terms of the original currency is as follows:
As the national currencies of the Group’s foreign subsidiaries are not assessed as the foreign currency risk, they are not included in the foreign currency position.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
62
27. FOREIGN CURRENCY RISK (continued)
Foreign currency risk occurs due to the Group’s assets and liabilities which are denominated mostly in USD, EUR and GBP.
The information below shows the Group's sensitivity to a 10% (+ / -) change in USD, EUR and GBP. 10%
is the sensitivity rate which represents the top management’s assessment of the possible change in foreign
exchange rates. Sensitivity analyses contains only foreign currency denominated monetary items in period
and shows the effect of 10% foreign exchange change on these items. This analysis covers, as well as external
loans, the loans denominated in a currency other than the functional currency of the parties taking the loan. Positive balances show increase in profit/loss and other equity items.
6- EUR net effect (4+6) 616.514 (616.514) 616.514 (616.514)
7- Net GBP assets/liabilities 211.670 (211.670) 211.670 (211.670)
8- Hedged portion of GBP risk (-) - - - -
9- GBP net effect (7+8) 211.670 (211.670) 211.670 (211.670)
TOTAL (3+6+9) 1.902.278 (1.902.278) 1.902.278 (1.902.278)
Interest rate risk management
The Group is exposed to interest rate risk due to the effect of changes in interest rates on the Group’s assets
and liabilities having interest returns. The risk is managed by the Group by maintaining an appropriate mix
between fixed and floating rate borrowings, by the use of interest rate swap contracts and interest rate forward
contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite;
ensuring optimal hedging strategies are applied, by either positioning the balance sheet or protecting interest
expense through different interest rate cycles.
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
63
28. FINANCIAL INSTRUMENTS FAIR VALUE AND HEDGE ACCOUNTING
DISCLOSURE
Fair value of financial instruments
Fair value is defined as the price that will be received between market participants in the ordinary course of
business at the date of measurement, at the time of sale or sale of an asset.
Estimates are necessary in interpreting market data to determine appropriate value. Accordingly, the
estimates presented herein are not necessarily indicative of the amounts the Company could realize in a
current market exchange.
Monetary assets
It is foreseen that the carrying values of cash and cash equivalents are equal to their fair values due to their
short-term nature.
The registered values of the receivables are foreseen to reflect the fair value together with the corresponding
impairment allowances due to their short term nature.
Monetary liabilities
The carrying values of trade payables are estimated to reflect their fair value due to their short-term nature.
30 June 2019 31 December 2018
Fair value difference reflects other comprehensive income / loss derivate
financial assets and liabilities (*) 63.511.131 (97.498.489)
Total 63.511.131 (97.498.489)
30 June 2019 31 December 2018
Fair value difference reflects over income / loss financial assets and
liabilities 65.681.678 79.843.539
Total 65.681.678 79.843.539
(*) The derivative instruments detailed in Note 18 consist of forward purchase / sale contracts. The Group has secured
part of its sales with foreign exchange forward contracts. In addition, interest rate swap transactions were made against
the risk of impairment arising from interest rate changes of the loan. As of June 30, 2019, the revaluation amount of the
Group's hedged transactions amounting to net TRY 57.581.013 (2018: TRY 75.387.265) has been presented in the
consolidated statement of financial position as "Derivative Financial Assets and Equity".
(Convenience translation of condensed interim consolidated financial statements originally issued in Turkish) ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARY
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2019
(Amounts expressed in Turkish Lira (“TRY”), unless otherwise indicated.)
64
28. FINANCIAL INSTRUMENTS FAIR VALUE AND HEDGE ACCOUNTING
DISCLOSURE (continued)
Fair value of financial instruments (continued)
Fair value measurement hierarchy chart
The fair value of financial assets and liabilities is determined as follows:
• Level 1: The fair value of financial assets and financial liabilities are determined with reference to actively
traded market prices.
• Level 2: Other than market prices specified at first level, the fair value of financial assets and financial
liabilities are evaluated with reference to inputs that used to determine directly or indirectly observable price
in market.
• Level 3: The fair value of financial assets and financial liabilities are evaluated with reference to inputs that
used to determine fair value but not relying on observable data in the market.